Members' blogs

Vietnam can be a scary place at times and this seems to be one of those times.

There is a chill in the political air as the horse trading in Hanoi continues to see who will come out on top in the next government reshuffle. While this will not be officially unveiled until next year, the process has already reached a fever pitch.

History tells us that the time leading up to a Party Congress is always tense and public campaigns against "social evils" and perceived "foreign threats" are common.

It is against this backdrop that Vietnam seems to be back pedaling on its commitment to free markets, allowing ugly attacks on prominent foreign invested businesses.

In a country that likes to speak of Us and Them, where xenophobia is never far from the surface, there is a popular game of demagoguery called Pin the Blame on the Foreigners.

The latest pinata in this party game is Jetstar. Step right up and take WHACK!

Jetstar's official sins as listed in the local press are many:

* Using a foreign name and trademark without license or permission
* Betting the wrong way on jet fuel futures (to the tune of a $31 Million loss)
* Cutting corners on maintenance and repairs (according to a couple of disgruntled employees who were let go)

The first charge seems like a bad joke, the second is really an error of business judgment not a criminal matter, while the last allegation seems to rest on dubious foundations.

More likely Jetstar's real sins were:

* Being Foreign invested
* Being Foreign invested and having the temerity to challenge Vietnam Airlines
* Being Foreign and successfully challenging Vietnam Airlines and taking market share and revenues from Mr Monopoly (All while losing money for the state, its major shareholder)

How dare these foreigners compete with us? We should shut them down and teach them a lesson! (Never mind trying to compete fairly on a level field, that's no fun...)

Time Magazine's take:

Jetstar Detentions Raise Red Flags for Investors in Vietnam

In most places, a business deal that goes sour can get you fired. In Vietnam, it could cost you your freedom. For decades, Vietnam's economic growth has been the envy of its developing neighbors in southeast Asia. In the last 20 years, GDP growth has fallen only once below 5%, typically hovering around 8% as the single-party state has attracted tens of billions of dollars in foreign investment and seen poverty rates drop below that of India, China and the Philippines.

But Vietnam's latest debacle involving two senior Australian executives may make investors think twice before getting into business with Vietnam. Tristan Freeman and Daniela Marsilli, the chief financial officer and chief operating officer of Qantas' Vietnamese operation, Jetstar Pacific, have been stranded in Vietnam since authorities prevented them from flying home to their families for Christmas. Earlier in 2009, Vietnam launched an investigation of the high-level executives after the airline, a Vietnamese and Australian partnership, reported a $31 million loss from bad bets on fuel futures, agreements on the future price of oil that committed Jetstar Pacific to paying above market rates for their jet fuel after oil prices dropped. (See pictures from the China-Vietnam border war.)

Freeman and Marsilli have not been charged with a crime yet and are officially being held "to respond to the requests from Vietnam's legal authorities in a timely manner." But Vietnam has strict laws on the books against losing state resources through economic mismanagement, potentially criminalizing the consequences of standard business risks.

News of the pair's interrogation and travel-ban was released last week, and Qantas says Vietnam's investigation into Jetstar Pacific could last months, leaving the two Qantas employees stuck in Vietnam indefinitely. One Vietnamese national, the former Jetstar Pacific general director Luong Hoai Nam, was also arrested for "irresponsibility causing serious consequences," according to state media.

The Vietnamese government's investment arm, the State Capital Investment Corporation, owns 70% of Jetstar Pacific and Qantas owns 27%, until 2007 the airline was fully owned by the Vietnamese government. In other words, Nam, Freeman and Marsilli lost the state a lot of money after investing in fuel futures when oil prices were escalating in 2008, eventually peaking at $147 a barrel in July, before oil prices slumped to a low of just over $30 in December 2008. But Jetstar Pacific wasn't alone in its fuel-hedging bets; other regional airlines such as Cathay Pacific and Singapore airlines also reported losses from similar transactions. Airlines use fuel futures to ensure a predictable fuel price, but they can lose big if the price of oil plummets as it did at the end of 2008. The CEO of Qantas, Alan Joyce, told reporters last week that Freeman and Marsilli did nothing wrong. The fuel hedging, Joyce said, was part of the "normal course of business practice."

Many analysts worry that the detention of Freeman and Marsilli signals a reversal of the Vietnamese government's widely lauded market reforms. With spiraling inflation and the global financial crisis taking a bite out of the country's crucial export sector, some say government hardliners have responded by rolling back economic and personal freedoms. Late last year, Vietnam blocked Facebook and Twitter and arrested a number of pro-democracy activists. Jetstar Pacific, as the only joint venture domestic airline in Vietnam, could have become a target for conservatives who resent giving up control to the private sector — especially as Jetstar has increased its market share at the expense of the state-run Vietnamese Airlines. Carl Thayer, a politics professor at the University of New South Wales, says the Vietnamese government is still "uncomfortable" with private competition and that its treatment of Jetstar Pacific is part of a "backlash against aspects of the globalizing economy."
...

Or for the LOCAL version of what is going on, here is Thanh Nien:

Safety violations exposed at Jetstar Pacific

Also a related article from Time:

China and Vietnam: Clashing Over an Island Archipelago

http://www.thanhniennews.com/business/?catid=2&newsid=53096

Another pain - 50-year lease

http://www.thanhniennews.com/business/?catid=2&newsid=50537

It's expected as VN Index drifted after hitting 500.

Everyone knows tourism is down and the hotels are hurting.

But do you know just how much they are hurting?

This article cites a recent survey that things are pretty bad.

Actually they are even worse that that and getting bleaker by the minute. This summer's low season could be a killer for many.

A friend in the industry tells me that the top international hotels in HCMC (Saigon) are at best doing 20-25% occupancies these days. AT BEST!

That is not even enough to pay staff and keep the lights on...

Hotel room occupancy keeps falling in difficult times

Occupancy has fallen significantly at hotels, Ken Atkinson, managing partner of Grant Thornton Vietnam, told reporters in HCMC on Tuesday when this accounting and consulting firm released its annual Hotel Survey 2009.
“Some are running around at 40% and lower because of low season,” Atkinson said and added that he knew this result after talking with hoteliers in Hanoi and HCMC.

Vo Ta Ngoc, general manager of Allezboo Beach Resort and Spa, backed Atkinson’s observation, saying international bookings at properties in Mui Ne this summer could tumble by as much as 30% from the same period last year.

Ngoc told the Daily on the phone on Tuesday that the fall mainly resulted from the decline in Russian arrivals in the seaside resort town of Phan Thiet in the central coast province of Binh Thuan.

Reliable sources close to the Daily said guests currently occupied just a little higher than 40% of the rooms at certain four to five-star hotels here.

Experts said that the existing low occupancy could pull the hotel room occupancy for all of 2009 even lower than last year, when the average occupancy rate for five-star properties in 2008 was only 56.9%, as against 65.7% in 2007.

The overall occupancy rate for high-end hotels across all categories was 59.8%, down 9.6 percentage points compared to 2007 as indicated in the sixth edition of the Hotel Survey that Grant Thornton conducted at 50 three- to five-star hotels and resorts with a total of 7,911 rooms throughout the country.

The average occupancy rates across high-end hotels in Vietnam dipped 14.2% in 2008 to their lowest in the past four years of the survey.

Despite the fall in room occupancy as the impact of global economic downturn on Vietnam’s hospitality and tourism industry, the survey shows average hotel room rates across all categories last year picked up by 9.6% from 2007, or to US$114 from US$104. The room rate at five-star hotels averaged US$195 per night last year...

Part of the problem is beyond anyone's control: the global meltdown, H1N1 swine flu etc.

But I believe part of these wounds are self-inflicted.

The hoteliers got GREEDY. Plain and simple. When times were good the hotels jacked up their rates to 200 and even $300 a night in many cases.

On many occasions now I have heard visiting business people and tourists complain about the hotel rates and say Vietnam no longer offers good value compared to Thailand and other regional destinations....

Good news, Bad news...

FDI to Vietnam is down a lot. Or is it?

The numbers are confused because Vietnam insists on making a big deal about how much it approves and licenses, when the only number that makes any real difference is DISBURSED FDI.

Approved FDI dropped 77% in the first half, reads the headline, but who cares, if much of this investment may never be realized.

2009 1st Half, New FDI licensed: $4.7 billion down 86.7%
2009 1st Half, FDI disbursed: $4.1 billion UP 13.8%

So is the glass half full or half empty?

You decide...

FULL STORY

Vietnam FDI plummeted 77 percent in first half

Foreign direct investment (FDI) in Vietnam dropped by 77.4 percent to US$8.87 billion in the first half of this year, according to a Foreign Investment Agency official who said the figure was not a bad one.

Agency statistics showed that 306 new projects worth $4.7 billion were licensed between January and June, down 86.7 percent in value over the same period last year.

During the period, $4.1 billion was poured into 68 operational projects, up 13.8 percent year-on-year, according to the agency, which operates under the Ministry of Planning and Investment.

Agency head Phan Huu Thang said the FDI result was positive given the extent of the current economic slowdown. He said the figures showed that investors believed in Vietnam’s moves toward a quick economic recovery and future development.

Some investors are currently negotiating with local authorities to invest in 187 projects worth $85.4 billion between 2009 and 2010, he said.

Vietnam is expected to lure some $20 billion worth of FDI in 2009, while $8 billion worth of FDI is expected to be disbursed in the same period. In 2010, the FDI disbursed is expected to increase to $9 billion.

Last year, the country enticed $71.7 billion worth of FDI, of which $66.4 billion came from 1,557 new projects, while the rest went to 397 operational projects, said Thang.

They really need to drop this obsession with approved investment once and for all, or at least make more clear what is really disbursed.

Another classic story here. Just 1 hour after opening what was dubbed Vietnam’s most modern underpass, it filled with water due to rains, causing cars and motorbikes to stall and creating a major traffic jam.

Vietnam’s most modern underpass closed after flood

Hanoi City government on Tuesday closed Kim Lien-Dai Co Viet underpass after the most modern underpass in Vietnam was flooded only two hours after inauguration.

The investor, Major Projects Management Unit for Urban Development of Hanoi, had workers pump water out of the work. They blamed uncompleted main pumping system as the culprit behind the flood on Tuesday morning.

The underpass was built to ease regular traffic jams at Kim Lien-Dai Co Viet intersection. However, local residents were suspicious about effects of the work after the problem.

The underpass was reopened one hour later but people still avoided traveling through it. As a result, traffic at the intersection turned congested on Tuesday.

Hmmm... So what was the cause of these floods in this MODERN and HIGH TECH tunnel?

Rains flood new Ha Noi tunnel on first day

The Kim Lien underpass in Hanoi was flooded under almost 40 cm of water following heavy rains just two hours after it opened to traffic on June 16.
the Kim Lien underpass is flooded 30-40 cm by a heavy rain on June 16.

It was closed for an hour to pump out the water, and Ngo Quy Tuan, deputy director of Ha Noi’s key projects management board, told Sai Gon Giai Phong it happened because of a contractor’s delay in installing the main pumping system.

It would be completed in October, he said, explaining the tunnel has been opened to traffic even though the overall work is only partially complete just to ease traffic pressure.

In the event, the flooding did not come as a surprise, he said.

But he told SGGP that he has asked the contractor to complete the main drainage by June before the onset of the rains.

Once the major pumping system is in place, the underpass would not be flooded again even in heavy rains, he assured.

The tunnel connects Dai Co Viet and Dao Duy Anh and was built by Japan’s Taisei Corporation for the Japan Bridge and Structure Institute at a cost of VND467 billion (US$26 million)...

So the Tunnel REALLY should be completed in October but the opening date was rushed "to ease traffic pressure."

Perhaps (I will go out on a limb here) it is NOT a good idea to rush major infrastructure projects to meet artificial deadlines, especially when safety may be at risk.

But does anyone learn from these lessons?

Bridge contractors face fines if deadline not met, official warns

Stay tuned...

I have a dream...

Someday a brilliant Vietnamese mathematician will come along and win the Nobel Prize for revolutionizing the field of Chaos Theory.

Why? Because CHAOS is key.

Vietnamese live and breathe chaos, like a fish breathes water.

I read this article recently and then read it again and had to post it.

Some will object that it has nothing to do with business, but if you ask me, it has everything to do with everything.

Electric poles, trees and even homes sag under the weight of a growing amount of telecom cables, which now outnumber those supplying the country’s electricity.

A thick black web of electric cables hangs menacingly over Trang Thi and Hang Khay streets near Hanoi’s Hoan Kiem Lake. Tourists stop and stare in awe, often snapping photos of the chaotic wiring.

Residents on the city’s Luong Van Can Street no longer dare to go out on their balconies, afraid of being electrocuted by the labyrinth of wires hung on the side of their homes.

Nearly one million electric poles throughout the country are weighed down by masses of these telecom cables, 30 percent of which are damaged or in poor condition, according to Electricity of Vietnam (EVN).

The state-owned group said it earned some VND81 billion (US$4.6 million) last year from telecom firms such as the Vietnam Posts and Telecommunications Group, Viettel Telecom, FPT Telecom and Hanoi Telecom that hang their cables on EVN’s electric poles.

Telecom companies can apply for a legal permit to hang their cables on the poles, but many do not.

“Electric poles are [intended] to transmit electricity, not cable information,” said Nguyen Thanh Lam, head of the telecom and IT department at EVN. “But they are now carrying more telecom cables than wires that supply electricity.”

An employee of a telephone company in Ho Chi Minh City, who wished not to be named, said that as demand for telephone and data communication services increases in Vietnam, companies are becoming impatient waiting for a legal permit to install their cables.

The employee said he was once caught by police in the city’s Binh Thanh District and fined hundreds of dollars for hanging cables without permission. But he simply waited until a day when there were fewer guards patrolling the area and continued to hang the cables illegally.

Many companies also abuse EVN’s permit system, Lam said. They will claim to want to rent space on a pole to hang just a couple of cables, but end up hanging dozens of them, he added.

It takes just five to 10 minutes to hang a cable and that many are hung surreptitiously at night, according to Lam.

Le Van Duc, deputy director of the Hanoi Construction Department, said there are thousands of cables hanging illegally from poles in the city and no one is claiming responsibility for them.

Some cables have been hanging for 20-30 years but no telecom firms admit to owning them, Duc said.

Along HCMC’s Truong Son Street en route to the Tan Son Nhat International Airport, large masses of telecom cables hang loosely without being bundled.

Those in front of the Saigon Super Bowl commercial center sag down to just one meter above the ground. On nearby Tien Giang Street, hundreds of wires crisscross between the poles in a dizzying jumble.

Security guard To Thanh Dung said the cables have been that way for more than a year now. Dung said he would ask someone to fix them, but he doesn’t know who the cables belong to.

Huynh Van Nhuong, who lives on the street, said he takes it upon himself to tidy and package the cables together from time to time as there is no one else to do it. Moreover, telecom companies are continually adding even more wires to the mass, Nhuong added.

In Hanoi, many telecom companies have expanded beyond using the electric poles, and now hang bunches of wires on trees. On Hang Ngang and Hang Dao streets, the cables also hang threateningly from lampposts.

Local Tran Ngoc Minh compared the hanging cables to “nooses,” waiting to trap unlucky passersby.

Minh recalled once seeing a tall tourist become ensnared in a tangle of the low-hanging black wires, with one of the cables even wrapping around his neck.

EVN last September ordered its power company members to inspect their telecom cables on electric poles nationwide.

However, officer Minh Hue of the Hanoi Power Company said the task is difficult because the telecom cables are in such disarray.

Hue said the company officials cannot distinguish between the wires which supply electricity and the telecom cables, let alone determine which telecom cables belong to which company.

The Hanoi Power Company has moved its electricity-supply wires underground on several streets including Tran Phu, Le Hong Phong and Ngoc Ha, but in removing the electric poles, the telecom companies then turned to using nearby homes and trees to hang their cables from.

A resident in Binh Thanh District in HCMC said his house was connected to the Internet two days after he signed a contract with Viettel Telecom.

“The cable is hung on the electric poles outside and the Viettel employee told me that to hang a cable does not require a permit,” the resident said.

CHAOS is key.

Just remember that and it all makes sense...

And as our future Vietnamese Nobel Prize winner takes the stage to deliver his acceptance speech, he will tell the story of how he found inspiration for his prize-winning theory staring out his window at an impossible tangle of wires...

http://english.vietnamnet.vn/biz/2009/05/849981/

"Whether or not capital from the interest rate subsidy programme is flowing into the stock market has been a hot topic in recent meetings among banks, the Securities Commission, investors, enterprises and economists.

In fact, economists have a legitimate reason to believe that capital from the programme is being used for securities investments, rather than for the expansion of production and business.

Right after the subsidisation programme was initiated through commercial banks, the stock market began warming up.

However, to date, government agencies still do not have enough proof to conclude that preferential loans are being used for securities investments."

If it's true, in and out of the market has to be very fast. The subsidy programme is only temporary. Those who made money need to thank SBV.

Here is the latest provocation from Nouriel Roubini.

Not sure I BUY the Renminbi premise. Short USD, I am on board, but long CNY?

Op-Ed Contributor - The Almighty Renminbi ?

THE 19th century was dominated by the British Empire, the 20th century by the United States. We may now be entering the Asian century, dominated by a rising China and its currency. While the dollar’s status as the major reserve currency will not vanish overnight, we can no longer take it for granted. Sooner than we think, the dollar may be challenged by other currencies, most likely the Chinese renminbi. This would have serious costs for America, as our ability to finance our budget and trade deficits cheaply would disappear.

Traditionally, empires that hold the global reserve currency are also net foreign creditors and net lenders. The British Empire declined — and the pound lost its status as the main global reserve currency — when Britain became a net debtor and a net borrower in World War II. Today, the United States is in a similar position. It is running huge budget and trade deficits, and is relying on the kindness of restless foreign creditors who are starting to feel uneasy about accumulating even more dollar assets. The resulting downfall of the dollar may be only a matter of time.

But what could replace it? The British pound, the Japanese yen and the Swiss franc remain minor reserve currencies, as those countries are not major powers. Gold is still a barbaric relic whose value rises only when inflation is high. The euro is hobbled by concerns about the long-term viability of the European Monetary Union. That leaves the renminbi...

Good article from Reuters recently on the Vietnam Education Crisis.

We have posted on this before here: Vietnam Education Crisis

But there is a LOT more to be said on the subject, which seems to be heating up and gaining more attention...

FEATURE-Firms struggle to hire skilled professionals in Vietnam

About a year ago, 2,000 of the best and brightest from five of Vietnam's top universities were invited to take a lengthy multiple-choice exam for a shot at a job at Intel Corp.

The giant computer chip maker had broken ground on its biggest factory ever in Vietnam's commercial hub, Ho Chi Minh City, and the $1 billion assembly and test facility, expected to start operations this year, needed good engineers.

It was more than just another big project. The Intel investment would put Vietnam on the global tech map and help a rising star in the manufacturing world move closer to its dream of advancing up the value chain.

But the results from Intel's test cast a spotlight on one of Vietnam's biggest barriers to achieving that dream: its inadequate and inflexible higher education system.

A fraction of the students passed the written exam, covering physics, electrical engineering, maths and other topics. They were given an English test and just 40 made the final cut.

Than Trong Phuc, Intel's country manager for Vietnam, said he was not surprised by the results.

"Is Vietnam a literate society with good people with fundamental skills? Yes," he said. "But do these people already have knowledge about chip-making in place? No. So we have to start from the ground."

...

"The demand for education at the post-secondary level is enormous. Demand way outstrips supply," said Jeffrey Waite, who follows education in Vietnam for the World Bank.

"The system is under enormous pressure to respond by expanding access, and there's always the risk of expanding access at the cost of quality ... Quality is of real concern."

...

"I bet very few graduates could give a correct answer if they were asked 'what is a market economy?'," said one recent graduate who declined to be identified. "But you know what? They made us memorise the Investment Law which took effect in 1987."

...

"It's like they want to have their cake and eat it. They know what they want. They want to have one or two of their universities to be top ranked in the world. But they don't want to give away what they have," the World Bank's Waite said.