FINANCE. finance & business news. Reference rate not affected by US FED's raising interest rate

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1 finance & business news 15 June Reference rate not affected by US FED's raising interest rate 1 Winning yield of government bonds at bottom zone 2 Consumer loans rise nearly 30pct by end May 2 Insurers reinvest tr dong in the economy 3 Viet Capital Bank's cheap loans for small firms 3 Moody's downgrades Sacombank 4 SHB raises capital for Cambodia subsidiary 4 KienLongBank wants to sell one million treasury shares 5 SaigonBank has new CEO 5 Is inflation decline temporary or a trend? 5 Government seeks ways to attract gold, foreign currency into the economy 7 Sterling drop will barely affect exports to UK: officials 8 Cement exports on the rise 8 Indonesia emerges as Vietnam's largest auto exporter 9 China Vietnam's largest trade partner in 5M 9 China remains the largest consumer of Vietnam's vegetables and fruits 10 Korea firms say customs rules still bothersome 10 EU forest pact gives Vietnam timber firms a leg up 11 Construction Ministry proposes importing sand from Cambodia 12 Vietnam to be among world's largest rice producers: FAO 13 Ministry mulls new taxes for auto industry protection 13 VN is committed to enforcing robust IP legal standards: government 14 Power consumption seen surging to record high 15 VND300 trillion needed for infrastructure projects in HCM City 15 PPP optimal solution to infrastructure investment in HCM City 16 Difficulties facing start-ups in Vietnam 16 Vietnam M&A market hits $1.8 billion in Jan-May 17 Railway industry turning to foreign investment 18 Foreign investment: what you need to know 19 How expensive are cars in Vietnam? 21 How are Japanese investors conquering Vietnam's retail market? 22 Australia potential market for Vietnam goods 22 Kien Giang plans $11.3b for development 23 Dak Nong authorities pledge optimal conditions for enterprises 24 Dak Lak promotes sustainable coffee production 24 Reference rate not affected by US FED's raising interest rate Office supply for startups sharply increases 24 BIZ NEWS Business Briefs Jun 15, Shares rise on energy, banks 26 ROS sends VN Index up 26 Sustainability reporting standards hoped to 'green' stock market 27 HNX nets $107mn in auctions this year 28 Sustainability Reporting Standard launched 28 Strategic investors prioritised to buy PV Power's shares 29 HAGL Agrico targets $200m revenue for Thuy Ta Ice-cream on UPCoM from June Vinamilk among top 50 listed businesses in Vietnam 30 Techmart Online features tech solutions 31 Foreign investor to join financial centre project in HCM City 31 Sustainable growth key to Son Tra Peninsula 32 Long Thanh airport site clearance runs short of VND18 trillion 33 Who owns the Tan Son Nhat Golf Course? 33 VNA signs agreement on cyber security 34 Vietnam Airlines targets nearly $4 billion in revenue for Zara looking to zip up fashion market with new store in Hanoi 35 Vietnamese travel startup wins $7k grant from international tourism accelerator 35 Freight train route links Vietnam with southwest China 36 Tech Data to distribute Microsoft Cloud products 36 Japanese company seeks opportunity in Can Tho infrastructure 37 Solar energy provider ET Solar wishes to invest in Can Tho 37 EVNGENCO 1's output hits 12.4 billion kwh in five months 37 Kahuna to make waves at Ho Tram 38 Vietnam's 50 best-performing companies announced 39 Programme to improve training for aquaculture 39 Seminar discusses furniture exports to EU 40 VBF2017 to seek ways to develop private economy 41 Top Vietnamese firms attend Asia's largest FB trade fair 41 Vietnam present at EXPO Astana Compensation for fish death-hit people complete by month-end 43 Tourist attractions face hotel room shortages this summer 43 Vietnam workers in Qatar unaffected by diplomatic crisis 44 15/JUN/2017 INTELLASIA VNA The daily reference VND/USD exchange rate was cut by 3 VND to 22,405 VND per USD on June 15, seemingly unaffected by the interest rate hike by the US Federal Reserve. With the current trading band of +/- 3 percent, the ceiling rate applied to commercial banks during the day is 23,077 VND and the floor rate 21,733 VND per USD. The rates listed at commercial banks during the opening hour mostly stayed unchanged from the day before. Both Vietcombank and BIDV kept their rates at the same level as on June 14, at 22,665 VND (buying) and 22,735 VND (selling) per USD. Intellasia No. 21, lane 173/63/17, Ngoc Ha Ward, Ba Dinh Dist, Hanoi All Rights Reserved Tel: Fax: Office@intellasia.com Websites:

2 Vietnam finance & business 15 June 2017 Winning yield of government bonds at bottom zone Techcombank kept its buying rate unchanged at 22,630 VND but raised the selling rate by 10 VND to 22,750 VND per USD. Earlier, experts said current foreign exchange policies of the State Bank have cushioned the domestic forex against outside shocks. However, the National Financial Supervision Committee also warned the exchange rate will bear pressure caused by demand for foreign currencies to pay for imports in the last months of the year. The country is forecast to have a trade deficit of about 3.5 percent of total export value vnp 15/JUN/2017 INTELLASIA DIEN DAN DOANH NGHIEP During the week from June 5th-9th, the State Treasury called for tenders of four bond tenors including five, seven, 20, and 30 years. The offer volume of these tenors was respectively 1.5, 1.5, one and one trillion dong. The bid volume of 5-year bonds was 3.8 times larger than the offer volume with winning rate of 93%, at bond yield of 5.05 percent per annum. The winning rate for 7-year bonds was 100 percent at bond yield of 5.33 percent per annum, down by 0.01%. Meanwhile, that of 30-year bonds reached 73 percent at yield of 7.5 percent per annum, down by 0.05 percent compared to the previous tender. The low wining volume of 30-year tenor compared to other tenors showed that 7.5 percent per annum is perhaps the bottom yield level of this tenor. Conversely, seven and 20-year tenors attracted great attention of investors in the past week although their yields saw no significant changes compared to the last winning tender. According to the analysis team of Bao Viet Securities Company (BVSC), so far, the State Treasury has completed over 80 percent of the government bond issuance plan set in the second quarter and 63 percent of the annual plan. The current market is still creating favourable conditions for issuer, especially the abundant banking liquidity and the downward trend of inflation. Thus, the winning bond yields across tenors are forecasted to less fluctuate in the short term. On the secondary government bond market, the total outright trading value in the past week reached trillion dong, down by 32.8 percent compared to the previous week. Trading of 3-5 year bonds accounted for 40.9 percent of the total trading value, equivalent to trillion dong, while that of 1-3 year bonds accounted for 38.7%, and 5-10 year bonds accounted for 10%. Bonds of over 10-year tenor accounted for 10.4 percent of the total trading value. The total repo trading value sharply rose by 49 percent compared to the previous week, reaching trillion dong. Foreigners had a net-buying week on the secondary market. Specifically, 685 billion dong were bought while 646 billion dong were sold, resulting in a 39 billion-dong net buying. From the beginning of the year until now, foreign investors have still been net buyers with trillion dong value. The yields of 1, 2,3, 5, and 10-year government bonds on secondary market continued to slightly fall in the last week within a range of 0.03% percent per annum, respectively reaching 3.684%, 4.474%, 4.696%, 5.076%, and 5.92 percent per annum. Meanwhile, seven and 15-year bond yields inched up to percent and percent per annum. The current yields of all tenors are lower than May Consumer loans rise nearly 30pct by end May 15/JUN/2017 INTELLASIA VNS Consumer lending by end May rose 29.7 per cent against the end of 2016, the National Financial Supervisory Commission (NFSC) has said. Of the total consumer loans, home renovation loans and home purchase loans accounted for 52.8 per cent, compared with 49 per cent in the end of As per the NFSC's report, credit growth of the entire banking system was positive, reaching 6.8 per cent in May, compared to 5.7 per cent in the same period in In particular, the lending terms have changed towards fewer medium-term and longterm loans. The proportion of short-term loans was estimated at 45.4 per cent, against 44.9 per cent in late Meanwhile, the proportion of medium- and long-term loans fell to 54.6 per cent, against 55.1 per cent. Lending in dong accounted for nearly 92 per cent, while lending in foreign currencies fell slightly to 8.2 per cent of the total lending from 8.4 per cent in late At the end of the first quarter of 2017, the banking sector continued to be the economy's Intellasia 15 June / 44

3 Insurers reinvest tr dong in the economy main source of capital supply, accounting for nearly 60 per cent of the total capital supplied via the financial market. The NFSC reported that as of now, liquidity troubles have declined. The ratio of loan to deposit (LDR) of the entire banking system was 87 per cent as of May, slightly lower than earlier. Inter-bank interest rates have also fallen to per cent per year from the previous 5 per cent. The State Bank of Vietnam withdrew VND28 trillion (US$1.22 billion) in May. According to the NFSC, the positive liquidity status is because of a rapid rise in State Treasury deposits as budget disbursement remains slow. As of late April, State Treasury deposits reached VND122 trillion, up 28.4 per cent against the beginning of the year. 15/JUN/2017 INTELLASIA TAP CHI TAI CHINH In the first five months of 2017, the reinvestment of insurers in the economy is expected to reach trillion dong, according to statistics of the Ministry of Finance, As of the end of May 2017, the total assets of insurers were estimated at trillion dong, up 19.5 percent over the same period of 2016, of which non-life insurers were estimated at trillion dong, and life insurers were estimated at billion. Besides, insurance companies have also reinvested in the economy an estimated amount of trillion dong (up 21.3 percent year-on-year), of which non-life insurers were estimated at trillion dong; and life insurers were estimated at trillion dong. In the first five months, insurers made an estimated payment of trillion dong (down 10 percent from the same period of 2016), of which non-life insurers were estimated to reach trillion dong and life insurers were estimated to reach trillion dong. Results in the first quarter of 2017 also showed the positive situation of insurance companies, especially reputable businesses. For example, in Q1/2017, Bao Viet Holdings continued to record positive business results with total consolidated revenue of trillion dong, up 27.5 percent year-on-year; the after-tax profit completed 32 percent of the year plan. Of which, total revenue from life insurance sector was estimated at trillion dong, up 32.4 percent year-on-year. The total revenue from non-life insurance sector was estimated at trillion dong, up 18.4 percent year-on-year. The total revenue from fund management activity was estimated at 24 billion dong, fulfilling 24 percent of the full year target. Bao Viet Holdings said that insurance business continued to be the largest contributor to the total revenue (79%), reaching trillion dong, followed by financial activities with 19.5%, contributing trillion dong to the total consolidated revenue in Q1. The parent company was estimated to achieve 360 billion dong in total revenue, up 12.3 percent over the same period; the pre-tax profit fulfilled 26.3 percent of the fullyear target. Viet Capital Bank's cheap loans for small firms 15/JUN/2017 INTELLASIA VNS Viet Capital Bank has earmarked VND600 billion (US$26.38 million) for lending to small and medium-sized enterprises based in HCM City and the north at an interest rate of 7 per cent. Under a programme called 'Connecting Viet Capital Bank with SMEs,' new SME customers and those who have repaid their old loans at least six months ago can borrow up to 80 per cent of the value of their mortgage. There is no penalty for early loan repayment. The programme will be implemented from now until December 31. For more information, customers can contact the bank's hotline at or its branches around the country. Intellasia 15 June / 44

4 Moody's downgrades Sacombank 15/JUN/2017 INTELLASIA VIR HCM City-based Sacombank's long-term deposit and issuer ratings have been downgraded to Caa1 from B3 by Moody's Investors Service. Its ratings outlook remains negative. The credit rating agency's Global Credit Research released on June 13 downgraded the bank's baseline credit assessment (BCA) to caa2 from caa1 and the long-term counterparty risk assessment to B3(cr) from B2(cr). Moody's downgraded Sacombank's long-term ratings to Caa1 from B3 mainly on account of the bank's weakened solvency, as reflected in its large stock of problem assets. Concurrently, Moody's has downgraded the bank's BCA to caa2 from caa1, to reflect the higher risk in the bank's standalone financial position. The negative outlook captures the elevated downside risks related to the rating of Sacombank. In Moody's view, the bank faces very high solvency and liquidity risks. In May 2017, the State Bank of Vietnam had approved the restructuring plan for Sacombank from now until According to the bank, the plan is the consequence of its merger with the problematic Southern Bank (not rated) in late Sacombank's total stock of problem assets stood at around VND90 trillion ($4.09 billion) at the end of 2016, around 27 per cent of its total assets. According to the bank, problem assets include non-performing loans, VAMC securities, repo transactions, and accrued interest receivables, Moody's noted in its report. According to Moody's, the bank has low balance sheet buffers against such a large stock of problem assets. Buffers included VND4.8 trillion ($ million) in credit provisions and VND19.6 trillion ($890.9 million) in Tier 1 capital at the end of In Moody's view, it will take the bank many years to gradually resolve its large stock of problem assets. As part of its restructuring plan, Sacombank plans to aggressively repossess and sell collateral backing its problem assets. According to the bank, the value of such collateralmostly real estateamounted to VND77 trillion ($3.5 billion) at the end of 2016, and the bank management has very high recovery expectations on problem assets in the coming years. In Moody's evaluation success in recoveries is far from assured, because collateral repossession can be lengthy in Vietnam, while its monetisation depends on the dynamics of the real estate market. The reported capital position of the bank is modest, with a tangible common equity to adjusted risk weighted assets ratio of 8.5 per cent at the end of The economic capital position of the bank is actually much weaker in Moody's view, because of the large provisioning gap, even if the bank is able to sell the collateral at close to its expected valuation. Moreover, Moody's expects that Sacombank will pursue a rapid growth strategy to increase the share of performing assets, which will create further negative pressure on its capital position. Profitability will remain very low in the coming years, as a large part of pre-provision income will be channeled into credit provisions. For 2016, the bank's financial performance was close to the break-even point. Sacombank's liquidity and funding profiles were relatively stable in 2016 and early 2017, however, after deteriorating in 2015 following the merger with Southern Bank. Liquid assets amounted to 14 per cent of total assets at the end of March 2017, providing a weak buffer against funding and liquidity shocks. SHB raises capital for Cambodia subsidiary 15/JUN/2017 INTELLASIA DTCK The State Bank of Vietnam (SBV) has agreed with the capital contribution worth $25 million of Saigon-Hanoi Joint Stock Commercial Bank (SHB) to its Cambodia's subsidiarythe Saigon Hanoi One-member Limited Liability Bank (SHB Cambodia) to raise the chartered capital of SHB Cambodia from $50 million to $75 million. As per SHB's Q1/2017 consolidated financial statement, as of March 31, 2007, the Intellasia 15 June / 44

5 KienLongBank wants to sell one million treasury shares bank's total assets reached trillion dong, up six percent from the beginning of the year; Deposits of customers increased 5.7 percent to trillion dong; loans to customers touched trillion dong, up six percent; the pre-tax profit hit 307 billion dong, up two billion dong compared to the same period last year. In 2017, SHB targets to mobilise trillion dong from economic organisations and individuals, up 20%; maintain the outstanding loans at trillion dong, up 18 percent and the non-performing loan (NPL) ratio at less than three percent. The total assets at the end of the year are expected at 270 trillion dong, up 15 percent year-on-year; the pre-tax profit is expected at trillion dong, up 50 percent against 2016; the dividend rate is projected at nine percent. 15/JUN/2017 INTELLASIA DTCK To supplement business capital, Kien Long Commercial Joint Stock Bank (KienLong- Bank) will sell one million treasury shares under agreement or order matching methods. Currently, this bank is having 3.8 million treasury shares. KienLongBank plans to sell treasury shares right after being approved by the State Securities Commission (SSC), no later than 30 days after the transaction is allowed. The selling price is market-based in line with the regulation of Hanoi Stock Exchange. In 2017, KienLongBank expects to raise total assets to 36.5 trillion dong, equal to 20 percent compared to 2016; the outstanding loan and capital mobilisation increase 25 percent and 23 percent respectively, reaching 24.7 trillion dong and 32.5 trillion dong; the pre-tax profit touches 250 billion dong; and the dividend payment rate is eight percent. SaigonBank has new CEO Is inflation decline temporary or a trend? 15/JUN/2017 INTELLASIA VNS The Saigon Bank for Industry and Trade (SaigonBank) has appointed Vu Quang Lam as its CEO with effect from Monday. Lam, a member of the bank's board of directors, will replace Tran Thi Viet Anh, who retired on Monday. Lam is a member of Phu Nhuan Construction and Housing Trading Company Ltd as well as deputy general director of HCM City Finance & Investment State-owned Company (HFIC). Around 65 per cent of the bank's capital is distributed equally between four major shareholders: HCM City Party Committee Office, Phu Nhuan Construction and Housing Trading Company Ltd, Ky Hoa Tourist Company and Saigon Petro Company Ltd Vietcombank and VietinBank own 4.37 per cent and 4.91 per cent of SaigonBank shares, respectively. The bank recently announced that its 2016's list of shareholders will receive dividend payment at the rate of 4 per cent. The list closes on June 27, With a charter capital of VND3 trillion (US$135 million), SaigonBank expects to pay VND123 billion in dividends to shareholders. The payment will be made on July /JUN/2017 INTELLASIA SAIGON TIMES The Consumer Price Index (CPI) is both an input indicator for the monetary policy management of the State Bank of Vietnam (SBV) and a measure of the quality of economic growth. It is because the Gross Domestic Product (GDP) growth target of 6.7 percent of the government in 2017 will only be meaningful when inflation is controlled at low level. Thus, the fluctuations of CPI in the near future will play a decisive role in the success of the government's economic governance. Inflation falls after 20 consecutive months of increase The CPI in May 2017 dropped by 0.53 percent compared to the previous month. This is the first reduction after a 20-month increase from September This result made the CPI in May 2017 to only 3.19 percent higher than May 216, and the average CPI of the first five months of 2017 to be 4.47%. If this trend continues in the near future, the target to control average CPI at below 4 percent of the government is entirely feasible. Intellasia 15 June / 44

6 The current question is whether this reduction of inflation is temporary or becoming a trend. To answer this question, it is necessary to first clarify the factors that have maintained the downward trend of inflation since early Inflation falls due to both internal and external factors. The downtrend of inflation from the beginning of the year is fairly unexpected, contrary to the earlier forecasts of many economists, because after hitting the bottom of 0.63 percent in 2015, CPI continuously rose throughout 2016 and ended the year at 4.74%. In 2017, the CPI is forecasted to face a number of unfavourable factors such as the upward movement of oil prices or the uptrend of the prices of basic commodities in the world, along with the plan to adjust prices of goods and services managed by the State such as health care, education, electricity, and domestic water, etc. The recent downward trend of CPI is supported by both internal and external factors. The first internal factor is the volatility of the world oil prices. From the beginning of the year, the average oil price has been ranging around 53.7 USD per barrel, much lower than the levels of 58 USD or 60 USD per barrel earlier predicted by many international financial organisation such as IMF and WB, etc. In addition, the global food and food product prices have declined after the sharp appreciation in The FAO Food Price Index, after increasing by up to 11 percent in 2016, fell by 1.3 percent in the first four months of The drop of the global food and food product prices is due to the favourable global weather for agricultural production. Meanwhile, the low oil price is because the global economic growth is not as high as expected, as well as the OPEC has not achieved a long-term agreement on reducing the volume of exploitation between member countries with Russia. Pressure to increase is still higher than pressure to decrease While the price movements of global commodities are very unpredictable, domestic factors are not supporting CPI in the remaining months of 2017, although at the regular government meeting in May 2017, the prime minister has asked the Ministry of Industry and Trade to consider not yet raising electricity prices in To lower the average CPI from the current 4.47 percent to 4 percent in the end of the year, CPI must continue to be controlled at low level in the near future. Currently, there are still many unfavourable factors for CPI. Firstly, the food prices, particularly price of pork is at the lowest level. With the price of live weight fluctuating around 30,000-35,000 dong per kilogramme, pig farmers will suffer losses and they will not re-grow pigs. Thus, the upward trend of pork price is inevitable, and the issue is just the increase level. The second negative factor for CPI is the adjustment of healthcare services for those who do not participate in health insurance. Accordingly, the first adjustment took place on June 1st 217, applicable to special-level public hospitals and about 3-4 adjustments are expected to be carried out in other public hospitals in the future. The third factor is an uncertain one but has potential strong and direct impacts on CPI. That is the possibility that the government may accept to adopt moderate monetary easing in pursuit of the GDP growth target in Accordingly, capital will be injected more into the economy so that businesses have the opportunities to increase the volume of product and service production. The two capital injection channels regularly used by SBV in the past years including the Open Market Operation (OMO) and the purchase of foreign currency from commercial bank have less been used since the beginning of the year. However, as confirmed by many bank leaders, the State Treasury transferred a huge volume of non-term deposits at SBV to term deposits at commercial banks in April and May. The increase of money supply has caused the interbank rates to immediately plummet from percent per annum on one-week tern to 2.3 percent per annum as of June 2nd To control inflation, SBV often withdraws money through issuing SBV's certificates of deposits. However, to date, the agency has not made such moves. Although the pressure to increase of CPI is still larger than the pressure to decrease, according to the writer's point of view, the degree has fallen dramatically after the prime minister's instruction to not increase electricity price in Electricity has a Intellasia 15 June / 44

7 Government seeks ways to attract gold, foreign currency into the economy very important role, as it is the input of many manufacturing industries, it affects the expenses of all people and businesses, and it may put pressure on price increase of all kinds of goods and services. 15/JUN/2017 INTELLASIA DTCK The issue of mobilising gold and foreign currency from the population has once again mentioned by the prime minister in the government meeting May This is the second time since the beginning of this year that the prime minister makes this request. As per the assessment of many economic experts, the zero percent interest rate policy for US dollar deposits was very effective at that time. However, this policy has revealed negative sides at this moment. The most worrying thing is the appearance of the foreign currency "blood breeding" and the declined remittance. Meanwhile, hundreds of tonnes of gold in the people still has not had clearing mechanism. Many National Assembly deputies said in the context of limited resources for economic development in the country, the policy on mobilisation of resources into production and business is quite right. However, how to mobilise this source is still a difficult problem. As per the National Assembly deputy Le Cong Dinh (Long An), resources should be mobilised from the people, especially remittances, into production and business, instead of bringing money and gold to deposit in banks. In order to do this, macroeconomic stability needs to be maintained, especially to control inflation, create strong confidence for the people. The strong improvement of investment environment and administrative reform create the best conditions for the people to start a business. "Remittances should be considered as a strong financial resource to help the country develop. Therefore, there needs to have preferential policy for remittances like FDI", said Dinh. However, it is not easy to attract gold and foreign currency from the population into production and business projects, according to banking experts. As per Dr Hieu, foreign currency and gold are the property of the people and not every has the need and knowledge to invest in business and production. Therefore, if the capital mobilisation of the people is improper, it will produce adverse effects. Even, there is the risk of being controlled, gold and foreign currency will increasingly shrink. It is a difficult problem to mobilise gold and foreign currency from the people to develop the economy. So far, the scheme related to this issue has not been proposed by the State Bank of Vietnam (SBV). A commercial bank leader said mobilising gold from the people for the economic development is a difficult issue because the habit of holding gold has become inherent. Therefore, at this time, we should focus on mobilising foreign currency from the people to serve the economic development. Dr Nguyen Tri Hieu said to attract foreign currency into production and business, the government needs to work out feasible plans, programmes and projects to provide to commercial joint stock banks to consult customers. Similarly, the State Bank and the Overseas Vietnamese Committee should coordinate to advertise these programmes, projects to overseas Vietnamese so that they know how to use these sources effectively. In addition, the government may issue government bonds in US dollar to mobilise capital abroad. However, as per Dr Le Xuan Nghia, the simplest way to mobilise foreign currency resources in the current economic development is to allow the mobilisation (with interest rate) and the lending in US dollar again. On the other hand, when the supply of foreign currency is plentiful, banks must reduce foreign currency interest rate to disburse, and the entire interest rate in the market will be pulled down. Currently, interest rate in dong is still quite high. If there is US dollar channel, the market interest rate will be neutralised. Regarding the concern about the dollarisation, if SBV allows the mobilisation of US dollar with interest rates, Le Xuan Nghia said if the dollarisation rate is 10%, it is not considered as a dollar-dominated economy. Intellasia 15 June / 44

8 Sterling drop will barely affect exports to UK: officials The issue is the State Bank needs to calculate and determine the proportion of US dollar in the economy and has suitable interest rate policy to mobilise foreign currency into banks while not causing the phenomenon of speculation, hoarding. 15/JUN/2017 INTELLASIA VNS The weakening of the UK sterling will not have much impact on Vietnamese exports since it is expected to be short-lived, an official of the Ministry of Industry and Trade said on Tuesday in response to public concerns. Tran Thanh Hai, deputy director of the ministry's Import-Export Department, said the UK was a large Vietnamese trading partner in Europe, but exports to the country only account for 3 per cent of the country's export revenue. "The sterling's depreciation is temporary and once the UK and European Union complete Brexit negotiations, investors will feel secure," Hai said. However, the ministry's officials also warned that firms with large orders from the UK that depend on that market heavily would be hit hard. This suggests that exporters not focus too much on an individual market, and should diversify their consumption markets to minimise unexpected damages. Dang Hoang Hai, director of the ministry's European Market Department, said Vietnamese shipments currently go through customs at the Netherlands, Germany and Belgium, from where they are able to access the UK market. After the UK leaves the EU, Vietnamese exporters could face more barriers in accessing the UK market this way. They would have to go through some procedures twice, like customs clearance, food safety and hygiene inspection, as well as other technical barriers, which would be costly and time-consuming for them. It would be much more difficult for the Vietnamese exports to reach British customers directly once technical barriers with the EU are in place, Hoang Hai said. Therefore, the ministry urged exporters to study other ways to ship goods. According to the ministry's statistics, the UK imports 700 billion pounds worth of goods, but Vietnamese exports account for just five billion pounds, or 0.5 per cent of the import value. Although Vietnam's export value to the market is not high, most of the exports are its major commodities such as seafood, farm produce, textile and garment, furniture and wood products. The UK, in fact, is one of the few single markets seeing a positive growth rate of shrimp imports from Vietnam; regional markets like the EU and Asean have seen a decrease. Cement exports on the rise 15/JUN/2017 INTELLASIA VOV Cement exports resumed upward trend during the first five months of this year after witnessing declines last year, according to the general Department of Vietnam Customs. Vietnam businesses shipped more than 8.2 million tonnes of cement and clinker in the first five months of 2017 and received $288 million, grew 16.6 percent in volume and 10.9 percent in value. Bangladesh and the Philippines were the two biggest importers of Vietnam products, of which Bangladesh made up 3.5 million tonnes, valuing at $103 million, and the Philippines accounted for 2.2 million tonnes, worth $96.2 million. Other import markets included Peru (241,000 tonnes worth $11.2 million), Taiwan (349,000 tonnes worth $10.3 million), Sri Lanka (332,000 tonnes worth $9.6 million), Malaysia, Laos, Cambodia, China, Mozambique and Australia. Last year, Vietnam exported 14.7 million tonnes of cement and clinker valuing at $561 million, which marked 7.1 percent decline in volume and 16 percent decline in value. Intellasia 15 June / 44

9 Indonesia emerges as Vietnam's largest auto exporter 15/JUN/2017 INTELLASIA THE SAIGON TIMES Indonesia overtook Thailand as Vietnam's biggest exporter of cars under nine seats in May, said the general Department of Vietnam Customs. Vietnam imported 7,200 autos of less than nine seats from Indonesia in the first five months of the year, up from a slight 100 units in the same period last year. Thailand came in second even thought it shipped 5,800 units to Vietnam, a year-onyear increase of 90.5%. Previously, Thailand always took the lead in this segment given Vietnam's commitments to the Asean Trade in Goods Agreement (ATIGA). The duty on completely-built-up (CBU) autos manufactured in Asean countries is down to zero in 2018 compared to the current 30%. A change in Toyota Vietnam's business strategy was likely the cause of the surge of car imports from Indonesia. The company imports Fortuner SUVs from Indonesia, instead of assembling them in Vietnam as before. Fortuner is a favourite model in the Vietnamese market, with about 1,000 units sold a month. In May alone, the Fortuner model led the sport utility vehicle (SUV) segment with 1,406 units sold, up 37%, said Toyota Vietnam. According to the Vietnam Automobile Manufacturers Association (VAMA), Toyota Vietnam sold more than 5,660 Fortuner vehicles in January-May, up 22.2 percent against the same period last year. Fortuner accounted for two-thirds of all the automobiles imported from Indonesia in the first five months. Vietnam spent $216 million importing 9,900 CBU autos in May, up 42.7 percent in volume and 27.3 percent in value against the previous month. This led CBU car imports in the first five months to reach 42,300 units worth $878 million, up 5.3 percent in volume but down 10.1 percent in value from the year-earlier period. Lower-than-nine-seat car imports in January-May amounted to 23,300 units worth $831 million, a year-on-year pickup of 37.8 percent and 35.7 percent respectively. Besides, $313 million was spent on imports of 15,800 trucks, down 16.8 percent in value but up 12.5 percent in volume. CBU car imports from non-asean countries dipped in the first five months. Vietnam bought 4,900 units from India, 1,800 units from South Korea and 1,600 units from Japan, down 500, 700 and 1,000 units respectively. CBU auto imports from Thailand totalled 15,900 units worth $288 million in January- May, up 27.2 percent in volume and 27.4 percent in value year-on-year, while the volume of CBU cars imported from Indonesia was 6.1 times higher in volume at 8,700 units and 8.8 times higher in value at $150 million, according to the customs. Meanwhile, Vietnam's imports of CBU vehicles from China, mainly trucks, reached 2,700 units worth $105 million in January-May, down 52.2 percent in both volume and value against the same period last year. China Vietnam's largest trade partner in 5M 15/JUN/2017 INTELLASIA VN ECONOMIC TIMES China was Vietnam's largest trade partner in the first five months of this year, with turnover of $32.76 billion, up 23.6 per cent year-on-year, according to general Department of Vietnam Customs. It has increased its imports of fruit and vegetables and seafood from Vietnam. As at the end of May, it had imported fruit and vegetables worth $1.06 billion this year, a 51 per cent increase and accounting for 75 per cent of Vietnam's exported fruit and vegetables. Export turnover of fruit and vegetables to other markets such as the US, Japan, and South Korea reached $44 million, $43 million, and $40 million, respectively. China also imported more seafood from Vietnam, worth $338 million and up 38 per cent. Though Vietnam exports large quantities of fruit and vegetables to China, export value is low because three-quarters is exported via unofficial channels. Intellasia 15 June / 44

10 Earlier this month, deputy of minister Agricultural and Rural Development Tran Thanh Nam asked the Plant Protection Department to complete documents requesting China to only allow Vietnamese exports of these goods via official channels.the US, Japan and South Korea with $44 million, $43 million, and $40 million. In a joint statement from Vietnam and China during President Tran Dai Quang's visit to the northern neighbour, the two countries agreed to accelerate all legal procedures for the export of Vietnamese fruit and vegetables. Once completed, such exports are expected to grow rapidly. Other Vietnamese exports to China increased rapidly in the first five months. Computers, electronic products and components, and phones and accessories totalled $2.69 billion, an increase of 85.8 per cent, while footwear totalled $418 million, up 29.1 per cent, and machinery and equipment $672 million, up 84.5 per cent. Total export turnover to China in the first five months was $ billion, a 42 per cent increase year-on-year. While growth has been strong, Vietnam still records a major trade deficit with China, of $11.5 billion in the first five months. South Korea and the US were the second and third-largest trading partners in the first five months, with $23.94 billion, a 45.2 per cent increase, and $19.96 billion, up 12.9 per cent up, respectively. Of its ten largest trading partners, Vietnam only recorded a trade surplus with the US, of $12.07 billion, the EU $10.03 billion, and Japan $152 million. China remains the largest consumer of Vietnam's vegetables and fruits Korea firms say customs rules still bothersome 15/JUN/2017 INTELLASIA VNEXPRESS As per the latest data from the general Department of Customs, in the first five months of 2017, China continued to be Vietnam's largest trading partner with the two-way turnover of $32.76 billion, up 23.6 percent year-on-year. Of which, some items are imported in increasingly large volumes from Vietnam such as vegetables and fruits, seafood, etc. Specifically, as of the end of May 2017, China was still the biggest importer of Vietnamese vegetables and fruits with $1.06 billion, up 51 percent and accounted for 75 percent of the total export value. The export turnover to other markets such as South Korea only reached $40 million compared to $44 million to the U.S, and $43 million to Japan. Besides, China also imported $338 million worth of seafood, an increase of 38%. Despite large volume of exports to China, Vietnam's export value still remains low because nearly three quarters of Vietnam's fruits and vegetables are through unofficial channel. At the Agriculture Market Steering Committee meeting earlier this month, deputy minister of Agriculture and Rural Development Tran Thanh Nam asked the Plant Protection Department to file a petition requesting the Chinese side to allow Vietnam's exports of this category via official channel. In the Vietnam-China communique on the occasion of the visit of President Tran Dai Quang to China, the two countries agreed to speed up the completion of legal procedures on market opening for some Vietnamese fruits; carry out the assessment of China's market entry standards for Vietnam's dairy and dairy products. If legal procedures to open markets for some Vietnamese fruits are completed, it is expected that Vietnamese fruits and vegetables exported to the Chinese market will continue increasing sharply. 15/JUN/2017 INTELLASIA THE SAIGON TIMES South Korean business executives in a dialogue on June 13 with the HCM City Customs Department complained the prevailing customs regulations are difficult to comply with and requested such rules be further streamlined. Nguyen Manh Hao of Samsung Electronics said the current rules require the company Intellasia 15 June / 44

11 to declare purposes of using materials in the customs form but this is an impossible mission since the company uses up to 50,000 different types of material in its production process. Hao said the company cannot give exact calculations for each purpose, i.e. for export or for domestic sale. He therefore suggested that all materials imported by Samsung be first assumed as for export processing. By the end of each month, depending on domestic sales, the company would make clear the volume of material used to make goods for local consumption. Another enterprise mirrored another problem when complying with the Vietnam-Korea Free Trade Agreement (VKFTA). Under this FTA, commodities subject to preferential tariffs must be transported direct between the two countries but given the absence of direct shipping services between the two countries, commodities often come to Vietnam through a third country. When customs officers scrutinise shipping invoices and find out that shipments are not transported direct from Korea to Vietnam, they will deny preferential tariffs for importers, the representative said. In addition, some companies complained about the inconsistent interpretation of regulations in different parts of Vietnam. Speaking at the dialogue, Hoang Viet Cuong, deputy director of the general Department of Vietnam Customs, said all complaints lodged by enterprises in the dialogue would be forwarded to the general Department and the Ministry of Finance for resolution. Kim Heung Soo, chair of the Korean Chamber of Commerce and Industry (KOCHAM) for the southern and central regions in Vietnam, said at the meeting that Korean firms are much upbeat about the business climate in Vietnam. In HCM City, there are over 1,000 active Korean enterprises. A survey conducted by KOCHAM shows 46.1 percent of Korean companies say they will expand business in Vietnam, while 71 percent say they are happy with their business performance in Vietnam. EU forest pact gives Vietnam timber firms a leg up 15/JUN/2017 INTELLASIA VNA Once the EU-Vietnam Voluntary Partnership Agreement on Forest Law Enforcement, Governance and Trade (VPA-FLEGT) comes into force, there will be opportunities for Vietnam to export more wooden products to Europe and other markets, delegates told a seminar in HCM City on June 13. A VPA is a voluntary trade agreement between the EU and countries making wooden products to promote trade in legal timber and ensure only legally harvested timber is imported into the EU from these countries. Vietnam and EU concluded VPA negotiations last month. According to delegates, the forest pact would increase the competitiveness of Vietnamese timber products compared to those from countries that do not have much control over the forestry sector. Speaking at a seminar on promoting furniture and handicraft exports to European market, Jana Herceg, deputy head of the trade and economic section of the Delegation of the European Union to Vietnam, said Vietnam is the second country in Asean after Indonesia to conclude this agreement. So when the VPA-FLEGT agreement takes effect, it would further boost the export of furniture products, she said. European consumers want to know about labour conditions and corporate social responsibility standards, she said. If Vietnamese companies understand consumers demand and meet these conditions, they have the opportunity to boost exports to Europe, she said. To penetrate the market, good quality is the first thing firms need to have, she said. "Once you have the products you have to make sure that people know about your Intellasia 15 June / 44

12 products, you need to have good marketing and good branding." Bui Thi Viet Anh of the Institute of Policy and Strategy for Agriculture and Rural Development said VPA-FLEGT certificates would help increase opportunities to export to other important markets. But the process is relatively complicated, and increases costs and administrative procedures in Vietnam, she said. Enterprises also face trade barriers and intense competition from other exporters to the market, which require them to improve quality, access to information and competitiveness. They need to ensure legal timber sources by increasing import of raw materials from low-risk countries, connecting with importers in developed countries, and investing in timber growing in Vietnam, she said. Nguyen Chanh Phuong, deputy chair of the Handicrafts and Wood Industry Association of HCM City, said besides branding, product design and price are two important factors in the competitiveness of the wooden sector. European consumers' habits are changing, and exporters need to catch up on these trends, he said. Johannes Schwegler of the Swiss Import Promotion Programme said there is an emerging trend of using laminated flooring and bamboo products as substitutes for tropical timber because of their environmental-friendliness and technical properties. Solid wood-based products, which are the strength of Vietnamese firms, still have opportunities for growth, but Vietnamese firms should keep abreast of market trends, he said. Bui Thi Thanh An, deputy director general of Vietnam Trade Promotion Agency, said exports of wood and wooden products were worth nearly 7 billion USD last year. The EU is currently the fourth largest importer of Vietnamese wood and wood products. It is also one of Vietnam's timber suppliers. Prospects for exporting furniture to the EU this year are good, she added vnp EU forest pact gives Vietnam timber firms a leg up Construction Ministry proposes importing sand from Cambodia 15/JUN/2017 INTELLASIA DTI NEWS The Ministry of Construction has proposed importing sand due to apparent domestic shortages. The ministry said sand imports must conform to trade regulations of the two countries, and explicitly rule out exports to a third country. The Ministry of Construction added that over recent years, demand for using construction sand has been on the rise in some southern localities. Vietnam's total sand reserves are now estimated at 2.3 billion cubic metres, meeting 60 to 65 percent of construction demand. Over the recent years, the illegal sand extraction has been found in different localities nationwide, including Cua Dai Beach in Quang Ngai Province's Hoi An Town. This has resulted in severe erosion for the beach with 20 hectares of Cua Dai beach having been washed away. Illegal sand excavating along Hanoi's rivers have continued increasing, polluting the environment. In the first 10 months of 2016, the municipal police discovered 151 cases of illegal sand excavation involving 191 people. They were fined VND2.8 billion (USD125,000). The uncontrolled excavation of sand has harmed the environment, affected waterway transport, caused land erosion and altered river currents. However high profits have meant people ignore the havoc they are causing, including the collapse of houses on river banks. Intellasia 15 June / 44

13 Vietnam to be among world's largest rice producers: FAO 15/JUN/2017 INTELLASIA VNA Vietnam is expected to be the world's fifth largest rice producer in 2017, according to the Crop Prospects and Food Situation report released by the UN's Food and Agriculture Organisation (FAO). The FAO forecast that the biggest rice producer this year will be China with million tonnes, followed by India with million tonnes, Indonesia and Bangladesh. The report said global rice output is likely to increase by 0.7 percent to million tonnes thanks to production facilitation policies in Asia and yield recovery in South America and Australia. After two years of decrease, global rice exports are predicted to expand by 5 percent in 2017 to 44.2 million tonnes compared with 43.6 million tonnes in the previous year, with India expected to remain the largest rice exporter. The organisation said global rice prices have been stabilised since early 2017 due to increasing demand and currency reforms in India and Thailand vnp Ministry mulls new taxes for auto industry protection 15/JUN/2017 INTELLASIA THE SAIGON TIMES The Ministry of Industry and Trade is mapping out a new strategy for the auto industry, with highlights including an exemption of special consumption tax for local content of autos, and raising tax rates on pickups to levels now applicable to sedans. In its draft strategy, the ministry suggests three groups of solutions to rev up the local auto industry that has remained underdeveloped despite a slew of tax incentives in the past. First, the ministry says that measures should be taken to make sure a domestic market is large enough for automakers, and in doing so, policies should be devised to encourage consumers to choose locally-manufactured vehicles. Technical barriers will be set up and controls tightened to check imports and fight trade fraud so as to create good conditions for local automakers to grow. For the second group of solutions, the ministry stresses that there must be policies supportive of local automakers, especially those with mainstay products, so that they can compete well with imported vehicles when import tariffs are slashed to zero in early Changing special consumption tax on autos is a key tool in the third group of solutions. This tax will be zero for local content of autos, while corporate income tax will also be revised down for large-scale auto projects. The ministry predicts that by 2020, Vietnam's auto market will expand to 450, ,000 vehicles a year, bigger than the auto market size of the Philippines. The volume may double to 800, ,000 units by If the draft strategy is endorsed, it will give a strong boost to local auto assemblers, encouraging them to increase the ratios of local content in their vehicles. In reality, local content ratios in vehicles of less than nine seats range from 7 percent to 10%. Two market leaders, Thaco and Toyota Vietnam, boast high ratios, at percent for the former, while Toyota Vietnam's seven-seat Innova has a ratio of as high as 37%. If the general special consumption tax stays at 50%, then a locally-assembled auto with local content of 40 percent will be subject to an overall tax rate of 30%, low enough for it to compete with imported vehicles. However, there are concerns that the application of a flexible special consumption tax rate will be an infringement of the World Trade Organisation's rules, which require member countries to adhere to non-discrimination. With the third group of solutions, the Ministry of Industry and Trade asks the government and the Ministry of Planning and Investment to have policies to attract multinationals to manufacture autos in Vietnam, especially products not yet available in Asean. Even this policy looks unviable, as most auto giants have been present in the region, and there is no strong boon for them to move production to Vietnam as auto Intellasia 15 June / 44