Vietnam telecoms to invest in new major undersea Internet cable  

Vietnam’s government has granted permission to domestic Internet providers to invest in a Southeast and East Asia undersea Internet cable, with the aim of improving the country’s Internet speed, news website thesaigontimes.vn reported Thursday.

 

The military-run telecom company Viettel, FPT telecom company and Hanoi-based CMC Telecom Infrastructure Joint Stock Co., were allowed to invest approximately $40 million into the 10,000-km Asia Pacific Gateway (APG) submarine cable network.

More than half of the investment will come from Viettel.

The $450-million cable will run directly from Malaysia to South Korea and Japan, with links branching off to other countries and territories, including Singapore, Thailand, Vietnam, Hong Kong, Taiwan and China.

In Vietnam, it will land at the central province of Danang.

The network is designed to withstand earthquakes and typhoons, and is expected to become operational in the third quarter of 2014 with a carrying capacity of 15.3 terabits per second, said Nguyen Van Khoa, CEO of FPT telecom company.

He also said the cable will be one of the ways to help his company, set to contribute $10 million, secure and stabilize its network service.

Le Dang Dung, deputy CEO of Viettel, said when investing in an Internet cable, Internet providers can save large sums since they will no longer be forced to lease cables from other providers.

According to a BBC report on July 5, Facebook said it would help fund the project in order to support is growth in South Asia.

Both Viettel and FPT have been investing and using the Asia America Gateway AAG Internet cable, which connects Asian countries and the US and has been operating for roughly four years.

Production remains weak in Vietnam, says HSBC  

 

Workers at a garment factory owned by Singaporeans outside Hanoi

A subdued domestic market and reduced global trade flows have continued to take a toll on manufacturing in Vietnam as production has fallen for the seventh month in a row this year, according to HSBC.

The manufacturing purchasing managers’ index (PMI) released Wednesday by HSBC and Markit Economics fell to 48.7 in October from 49.2 the previous month, moving further away from the neutral 50 value.

The gauge covers around 400 companies. An index below 50 indicates a contraction.

HSBC noted that the rate of contraction remained marginal overall and if compared to July, it was “markedly slower.”

“New orders and new export business both fell for the sixth consecutive month. The decline in new export orders was the steepest in the survey's history, as companies reported reduced demand from clients in China, Japan and Taiwan,” the bank said in a statement.

Inventories of finished goods were broadly unchanged for the fourth straight month, it said, adding that average purchase prices rose for the third month in a row, reflecting higher costs for foodstuffs, fuels and transportation.

“Weak global and domestic demand continues to weigh on the manufacturing sector; new export orders contracted at the sharpest pace since the series began,” said HSBC economist Trinh Nguyen.

“The rise of input costs did not help, as manufacturers could not pass off the costs to consumers due to sluggish demand. The output index level, although still signalling contraction, is stabilizing at close to fifty suggesting that the economy will likely recover towards the end of Q4.”

Gold tax won’t stop hoarding, experts say  

 


  An employee weighs gold rings at a jeweler’s in Hanoi. Vietnam’s central bank said last week that the government should consider levying a special consumption tax on gold. Photo: Reuters

Experts say the central bank’s plan to impose a luxury tax on gold will not stop the public from hoarding the precious metal.

They warn that such a move could in fact bring even more chaos to a market already fraught with dodgy practices and policy uncertainties.

The State Bank of Vietnam said last week that even though the government will not ban gold holdings, it is necessary to restrict the presence of the metal to support the local currency.

Since gold is not a product that the government encourages to be traded widely, it should consider levying a special consumption tax on the metal, the central bank said. The bank also suggested a capital gains tax on any profit from the sale of gold.

The monetary authority did not propose a specific tax rate, saying that other agencies will come up with a proper number later if the suggestion is approved by the government.

Vietnam began to tighten control of the gold market in 2010 with the closure of around 20 gold trading floors.

Last August, the central bank officially took over the production of gold bullion, appointing Saigon Jewelry Company as the country’s only producer. The firm, whose SJC-branded bullion already accounted for 90 percent of the local market, now only casts gold bars based on orders from the central bank.

According to the central bank, its efforts have paid off, allowing local lenders to buy 60 tons of gold since April.

Vu Duc Dam, chairman of the government’s office, told the press on Sunday that keeping gold savings was an old tradition in Vietnam that was not helping the economy. There have to be measures to attract and make full use of these assets, he said.

Dam said gold prices used to put downward pressure on the dong, but now the exchange rate between the dong and the US dollar has been stabilized.

Gold fell 5 percent in Vietnam in October, ending the month at VND46.13 million per 37.5-gram tael.

The central bank has kept the reference rate for the dong stable at 20,828 against the dollar since late last year.

Nguyen Hoang Hai, general secretary of the Vietnam Association of Financial Investors, a group of 63 institutions including banks, insurance companies and funds, said the new taxes would be well in line with the government’s efforts so far to reduce the dominance of gold on the domestic market and strengthen the dong.

A high tax rate will push local prices above international prices and many people will no longer buy and sell gold, he said.

But many other experts are not so sure about the new plan.

Former central bank governor Cao Sy Kiem said luxury taxes are usually very high. That means gold prices will increase sharply if the tax is introduced, he said.

The central bank has its reasons to discourage people from keeping gold, but officials have to think carefully about how to do it, he said.

The public prefer gold because they want to protect the value of their savings when inflation is high and the local currency is weak. Making the metal more expensive will undermine that purpose, he said.

“The central bank should consider other options for restricting gold. There’s no need to impose a luxury tax on gold like alcohol, cars and tobacco,” said Kiem.

A senior official from the General Department of Taxation said tax officials have never thought about a special consumption tax on gold, which is already subject to a 10 percent value-added tax.

This luxury tax should be brought into place only when the government wants to keep tight reins on a certain product, he said.

The question is whether gold should be treated as a luxury product, he said.

Nguyen Thanh Long, chairman of the Vietnam Gold Trade Association, believes the answer is no.

Existing regulations do not list gold among restricted products, so it should not face a luxury tax, he said.

“A value-added tax has already been added to the prices of gold bars and jewelry. If there is a new tax, it means gold is taxed twice,” Long said.

Since most of the gold in the country has been privately held for years, it would not be fair to impose a tax on this amount now, he added.

Tran Thanh Hai, general director of Vietnam Gold Business, a Ho Chi Minh City-based gold trading company, said luxury taxes on alcohol and tobacco products now range from 10 percent to 65 percent.

If the lowest rate of 10 percent is applied for gold, the gap between local and global gold prices will expand to up to US$220 per tael.

“I just can’t imagine what will happen to the gold market when the proposed tax policies come into effect,” he said. “We have seen high taxes lead to problems like black markets and collusion between law enforcement officers and smugglers.”

Industry insiders said the market has already had enough setbacks recently, including an increasing amount of fake or low-quality gold and the establishment of a government-imposed monopoly that sent many people rushing to sell gold bars that were not produced by Saigon Jewelry Company for fear of losses.

Uncertainty has hung low and thick over the market this year.

The State Bank of Vietnam had earlier ordered banks to stop raising physical gold deposits starting November 25. But now, to avoid forcing banks to repay a large amount of gold to depositors and putting pressure on liquidity, the deadline has been extended to mid 2013.

While the central bank has strengthened regulations in an attempt to eliminate small gold shops, its plan to set up an authorized gold trading system has yet to be implemented.

The central bank also said last week that it is not its job to keep gold prices stable.

“The gold market is unstable now and a new tax will just create even more difficulties and put businesses in a crisis,” said Nguyen Van Dung, chairman of the HCMC Jewelry Association.

“Jewelry sales will slow while things will get even more complicated in the bullion market amid the monopoly. I’m worried most about more than 20,000 employees at our gold companies,” he said.

“We will file a petition if the luxury tax is approved,” said Dung.

By Thanh Xuan - Anh Vu, Thanh Nien News (The story can be found in the November 2nd issue of our print edition, Vietweek) 

Europe plans more investment in Vietnam: survey  

 A worker at a plastic factory in Vietnam

More European companies plan to increase their investments in Vietnam amid concerns about economic conditions and revenues, a new survey found.

The European Chamber of Commerce in Vietnam (EuroCham) said 39 percent of respondents aim to expand their business in Vietnam, up seven points from the previous three months. There has also been a decline in the number of companies planning to reduce investments “‘significantly” in 2012, from 20 percent to 13 percent.

“This shows a change towards businesses’ plans to invest in Vietnam,” the group said.

The number of companies that are looking to maintain their level of investment remained relatively constant at 32 percent, which EuroCham said probably “reflects the medium-term optimism linked to the recent improvements in macroeconomic stability of Vietnam.”

The shift in confidence came after a long period of caution among European companies that began around a year ago. At times, up to one third of the respondents wanted to reduce investments in Vietnam.

But the improved sentiment was not enough to pick up the EuroCham Business Climate Index, which lost another three points to the record low of 45 this quarter. This is also the second quarter the index has stayed under the neutral 50 point level.

According to EuroCham, there was a further drop in companies assessing their current business situation as positive, from 30 percent to 26 percent, while 35 percent of respondents assessed their business outlook as “not good” or “very poor.”

The survey also found that 44 percent of companies were expecting revenue to increase, down one point from last quarter.

“During the past 12 months, EuroCham’s BCI has declined from 56 to 45 points – a drop of 11 points. This indicates a declining confidence in Vietnam as an investment destination for European business,” EuroCham Chairman, Preben Hjortlund, said in a statement. 

“We remain hopeful that recent developments such as the beginning of negotiations for the FTA between Vietnam and the EU will encourage Vietnam to improve its competitiveness and attractiveness and turn around the declining business climate,” he said.

Vietnam’s economy is expected to expand 5.2 percent this year.

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Experts jeer overpriced small apartments  

  Residential buildings under construction at a newly developed area on the outskirts of Hanoi. Photo: AFP

The plan to build 25-square-meter apartments in Ho Chi Minh City is being criticized once again, with the Ministry of Construction proposing the government run a nationwide trial.

Experts say the construction may solve the housing shortage problem for a small number of people, but that it will hinder civil and urban development.

Experts from numerous fields have made their objections known to the ministry since May 2010, when it gave the go-ahead to the Dat Lanh Real Estate Company to build one hundred 20 sq.m. apartments in the southern hub.

More nays came after Minister Trinh Dinh Dung spoke at a recent meeting with the Ho Chi Minh City Real Estate Association where he has asked the government to allow more companies to run pilot construction projects for smaller apartments.

Professor Le Huy Ba, head of the Institute for Environmental Science, Engineering and Management at the Industrial University of HCMC, said small apartments will create problems in the future.

Ba said a 25 sq.m. apartment only provides enough space for one or two people, and thus would mainly be suitable for newlyweds.

But when the family grows, the apartment would be too small and they would try to extend the space in different ways, Ba said. Existing laws do not restrict the number of residents in a dwelling.

He said the problem of overcrowding already exists at many old small-sized apartments in Hanoi.

Buyers of small apartments tend to have relatively low incomes, often spending most or all of their savings to buy an apartment and are not likely to be able to afford switching to a larger house later, he said.

Ba said small apartment buildings will eventually turn into slums.

The immediate benefit from such projects is far less than the harm they will inflict on society later on, including on the owners of such apartments, he said.

The professor also expressed concern about the quality of life in small spaces.

He said 25 sq.m. apartments do not have enough room for basic activities and do not let in enough light or fresh air.

“It’s necessary to meet housing demand, but not with such small apartments. We have to reconsider this plan. It’s not living when people are stuffed into a box.”

Vietnam’s Housing Law requires that social apartments be at least 30 sq.m. and commercial apartments be at least 45 sq.m.

Nguyen Thanh Van, general director of First Quality Management and Consultancy Company in HCMC, also said that investing in small apartments amounts to “a step backwards.”

He said small apartments, if any, should only be built for rent in industrial hubs with large populations of migrant workers such as Dong Nai and Binh Duong provinces.

“It should not be a trend in large, crowded cities.”

Van said the property market is struggling, and if the plan is approved, every investor would build small apartments intended to sell fast, which would cause urban areas to be “chopped up into pieces.”

He said the solution to housing demand should not be about size, but prices.

Under the pilot program, the Dat Lanh Company is selling its 20 sq.m. apartments for around VND300 million (USD 14,400) per unit, or VND15 million per sq.m.

Van said that is not such a great deal considering that similar apartments at other projects are selling at VND12 million per sq.m., with investors still earning significant profits.

He said construction costs less than VND6 million per sq.m. and VND2 million for the land, so VND8 million would be the appropriate price.

“The final goal is to raise the living quality for people, thus policies must be instituted so that a majority of people can afford homes with lots of space.”

By Dinh Son, Thanh Nien News (The story can be found in the November 2nd issue of our print edition, Vietweek)