Workers at a construction site in Ho Chi Minh City. Construction firms said they are optimistic about the industry’s prospects this year. The construction industry had a very tough time last year but insiders say the decline in building activity may be over.

Nguyen Luong Thinh of the Ho Chi Minh City-based Binh Minh Construction Company said 2008 was the most challenging year in the last two decades for the industry. The economic problems last year had a huge impact on the industry as well as the construction material and real estate sectors, he said. “The sudden downturn came as a shock to all construction firms, which just one year ago had so much work to do and enjoyed an average annual growth rate of 30 percent.” The rise in borrowing costs, salaries and construction material prices in the first half was a burden that many firms found too heavy, he said. As prices rocketed, materials alone accounted for as much as 70 percent of the total construction cost. Many building contractors said they had to accept losses because investors refused to pay more after signing contracts. Le Thanh Cong, deputy chairman of the HCMC Construction Association, said 40 percent of more than 2,000 construction firms in the city are small-sized and most of them had to stop working last year or do contract work for small projects. But construction firms said they are optimistic about the industry’s prospects this year. Huynh Phu Kiet, chairman of Toan Thinh Phat Architecture Investment Construction Company, said the economy is expected to recover next year, with the construction industry likely to see a recovery earlier. The scenario for the industry would become bright again in the third quarter this year, Kiet said, noting that his company signed construction contracts worth VND300 billion (US$16.85 million) in the first quarter. Construction firms also said the industry would benefit greatly from the government’s stimulus package, especially a VND8 trillion ($450 million) program to build low-income housing around the country. Construction value expanded 6.9 percent in the first quarter, a “surprise on the upside,” according to a note last month from Vietnam Property Fund Ltd. With construction activity gaining momentum, the construction material market also started to pick up. Ha Tien 1 Cement Joint Stock Company, which has a 30 percent market share in HCMC and the southeastern provinces, said sales in April recovered to more than 7,000 tons a day after months of slowdown. The sales recovery has allowed the cement manufacturer to run its plants at full capacity again. Pham Chi Cuong, chairman of the Vietnam Steel Association, said steel consumption last month returned to the normal level of more than 360,000 tons. Last year, the monthly consumption dropped to as low as 110,000 tons. Despite good prospects for the construction industry this year, Le Viet Hai, chairman of the Hoa Binh Construction and Real Estate Corporation, warned that construction firms should not be too optimistic when making plans for the year. The industry still depends on how well the economy fares and it would be affected if high inflation returns or if investors cannot find enough funds for their projects later this year, Hai said. Cong said even if the industry recovers as expected, the opportunities would not be available for all businesses, with small contractors affected the most by the harsh competition. Source: TBKTSG

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Germany's exports have been hit hard by the global slowdown

Germany's economy will shrink by 6% this year and continue to contract in 2010 according to a forecast from the country's leading economic think tanks.

The estimates, compiled by eight institutes for the German Economy Ministry, also predicts that the rate of unemployment will hit 10% next year.

The gloomy forecast chimes with that of the IMF, which shows the German economy contracting by 5.6% this year.

This is faster than any other major economy apart from Japan, says the IMF.

"The joint forecast of the institutes paints a very dark picture of German economic prospects in the foreseeable future," said Timo Klein at IHS Global Insight.

Severe contraction

The latest twice-yearly forecast shows just how rapidly the outlook for the German economy has deteriorated.

Through 2009 we anticipate a loss of more than 1 million jobs Joint report from German economic think tanks

The think tank's previous forecast predicted economic growth of 0.2% for this year.

The deepening global downturn now means the group sees a severe economic contraction this year and a further shrinkage of 0.5% next year.

"For 2010 the institutes expect no drastic rebound," the report said.

The IMF is forecasting a contraction in the German economy of 1% in 2010.

Comments by some of Germany's largest companies confirmed the bleak outlook for the country's economy.

"It will probably take five years before demand is back to its pre-crisis level in 2007," said Karl-Thomas Neumann, boss of car parts firm Continental.

The chief of rival Robert Bosch, Franz Fehrenbach, said: "We expect to see a deep recession until well into 2009."

Job losses

The report for the Economy Ministry also forecasts a fall in exports of 22.6%, compared with its prediction of a rise of 0.1% made just six months ago.

Germany is world's largest exporter.

Unemployment, the report says, will hit 10.8% in 2010.

"Through 2009 we anticipate a loss of more than 1 million jobs... and in the [autumn] unemployment will be well over the 4 million mark," the think tanks said.

The IMF forecast sees the Japanese economy contracting by 6.2% this year before growing by 0.2% next year.

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South Korea-based Samsung Electronics, the world’s No. 2 mobile phone maker, will put a handset factory in northern Vietnam into operation this month, a company executive said.

Most of the factory’s products will be exported and Southeast Asian countries would be the first markets, the executive told TBKTSG Online. Earlier, the Vietnam News Agency had said the plant, located in Yen Phong Industrial Park in Bac Ninh Province, would initially produce 30 million handsets a year and step-by-step increase its annual production capacity to 100 million units. The agency also said the factory’s total investment capital was US$670 million. The investment is in line with Samsung’s efforts to cut costs to improve global price competitiveness and meet fast-growing demand in Southeast Asia. In addition to the company’s domestic handset plant in Gumi City, about 250 kilometers from Seoul, Samsung also runs handset facilities in China, India and Brazil. Source: Thanh Nien

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Ho Chi Minh City will encourage more investment in advanced mechanical engineering and the electrical, electronic, and chemical industries in its industrial parks, an official said.

By 2020 about 7,000 hectares of land would be earmarked for setting up factories in three export processing zones and 12 industrial parks in the city, up from the current 4,000 ha, Vu Van Hoa, chairman of the HCMC Export Processing and Industry Zone Authority (Hepza), said. By last year the parks and zones housed nearly 1,200 projects with an investment of US$4.36 billion, of which 463, worth $2.63 billion, are foreign-owned, according to Hepza. They contributed $17 billion to the country’s total export of $62 billion last year, it said. Reported by Minh Quan

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The procedures to get the subsidized loans would be very quick and simple to ensure loan applicants do not miss the chance to recover from the economic downturn, said Cao Sy Kiem, a member of the National Advisory Council for Monetary Policy. The central bank Wednesday announced guidelines for the 4 percent loan subsidies the government announced for companies, with most commercial banks saying they are clear and adequate.

The subsidy, part of a US$1 billion economic stimulus package, will be provided for loans taken by both state-owned and private businesses, except those operating in 13 specified industries like entertainment, real estate and securities. According to a circular posted on the State Bank of Vietnam (SBV) website, commercial banks have to register for the subsidies no later than the 10th day of every quarter. For loan support in February and March this year, the deadline is February 10. Banks have also been told to report monthly subsidies no later than the 10th day of the following month. Based on these reports, the central bank will transfer 80 percent of the subsidies every month. The rest will be transferred after the banks submit the whole year’s report. Eligible firms will get the subsidies for up to eight months on short-term loans taken between February and December this year. Chairman of the state-owned Vietinbank, Pham Huy Hung, said since the central bank’s guidelines are clear, his bank would immediately inform customers of the subsidy program. Hung said 60 percent of his clients are small and medium-sized enterprises and the subsidy would help them remain in business. Vietinbank is Vietnam’s fourth-largest lender by assets. Vietcombank CEO Nguyen Phuoc Thanh said his bank would start implementing the subsidy scheme. One fourth of the customers at his bank are small or medium companies. Dau Tu Chung Khoan (Securities investment) magazine Wednesday quoted him as saying the government’s decision would get credit flowing and, more importantly, lower prices. He also noted that local banks are flush with liquidity. The SBV is aiming to keep credit growth in the banking system at around 20 percent in 2009 after a rise of 21-22 percent last year. A senior official at HSBC Vietnam Wednesday told Thanh Nien Daily the bank is waiting for more detailed instructions from the central bank concerning eligibility criteria. The central bank held a meeting with commercial banks in Ho Chi Minh City Wednesday to discuss implementation of the scheme. Cao Sy Kiem, a member of the National Advisory Council for Monetary Policy, told Thanh Nien Daily the procedures to get the subsidized loans would be very quick and simple to ensure loan applicants do not miss the chance to recover from the economic downturn. Kiem, a former central bank governor, said, however, SBV needs to keep the procedures uniform at all banks so that none of them cause difficulties to borrowers. Last month the benchmark rate was lowered to 7 percent from 8.5 percent, the sixth rate cut since October. Commercial banks use it to calculate their lending rates, which should not exceed 150 percent of this rate. Some businesses said, however, they would not benefit from lower interest rates since orders have declined sharply, they have cut back on production, and do not need new loans. Reported by Thanh Nien staff

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The power to assess and ratify the environmental impact of new projects coming up in Ho Chi Minh City industrial zones may be transferred from the environmental regulator to zone authorities at the latter’s request.

Ngo Anh Tuan, deputy head of the HCMC Export Processing and Industrial Zones Authority (HEPZA), said his agency would soon send a request to the city People’s Committee. The Department of Natural Resources and Environment is currently entrusted with the task. Earlier, the Ministry of Natural Resources and Environment released a circular, effective from January 7, saying the management board of economic, industrial, export processing, and hi-tech zones can be allowed to evaluate and approve projects if they satisfy certain conditions. Tuan added that HEPZA would also ask the city administration for authority to approve investors’ environmental protection commitments which now invests in district-level people’s committees. Source: TBKTSG Online

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An increase of less than 10 percent in retail electricity prices, as proposed by the Ministry of Industry and Trade, will not seriously affect production and daily life, Deputy Minister Do Huu Hao said Tuesday.

The impact of the proposed price hike on the economy and society had been carefully calculated, Hao said. In December, the ministry submitted to the government a proposal to raise retail power prices by less than 10 percent. Pham Manh Thang, head of the Electricity Regulatory of Vietnam, said the Ministry of Finance was assessing the proposal and the increase will be considered alongside the prices of coal and oil used for producing electricity. If the proposal is approved by Prime Minister Nguyen Tan Dung, the new retail power prices will take effect in late February, Thang said. The Ministry of Industry and Trade has proposed the first 50 kilowatt hours of electricity used by families each month be subsidized to minimize the effect of higher power prices on the nation’s poor The current average retail price in Vietnam is VND860 (5 US cents) per kilowatt hour, with power for production costing more than power for household use. Thang said the proposed electricity price increase was expected to wipe 0.05 to 0.07 of a percent off economic growth and push inflation up by 0.25 to 0.3 percent. Power and gasoline are the two products that determine the prices of almost all goods on the market, and both power and gasoline prices should not be raised at this juncture, Lao Dong (Labor) Newspaper quoted economist Dinh Son Hung as saying. Hung said an increase in power prices would undermine efforts to stimulate the economy this year in the face of a global economic slowdown. Nguyen Van Son of the Vietnam Standard and Consumers Association said local consumers would be unhappy with the price increase proposal. The proposal favored power producers and did not mention any efforts by the power industry to lower prices or anything about consumer rights, Son said. Hao said power prices were not being raised to help Electricity of Vietnam (EVN) offset its losses but to encourage investment in new generation capacity. The price increase was necessary to facilitate investment, Hao said, pointing out that electricity costs in Vietnam were lower than those in other Southeast Asian countries. State-owned EVN currently controls all power transmission grids and retail networks, including the Hanoi Electricity Company and Ho Chi Minh City Electricity Company. EVN had previously submitted a plan to the government proposing increases of up to 20 percent in the retail price of electricity. According to the proposal by the Ministry of Industry and Trade, the state will subsidize the first 50 kWh of electricity used by local residents each month to minimize the effect of the price hike on low-income families. Up to 2.5 million poor households in Vietnam use less than 50 kWh of electricity per month, Hao said. He also said from 2010 power prices will be adjusted in accordance with input costs. Hao said his ministry will coordinate with the Ministry of Finance in deciding power price adjustments of 5- 7 percent. Price changes of more than 7 percent will require approval from the prime minister. Vietnam, whose electricity capacity stands at some 15,000 megawatts now, is expected to increase capacity by 4,000MW a year by 2025. Meanwhile, the country now is out of sources for hydroelectricity plants, which need less investment than thermoelectricity or nuclear power plants. Vietnam’s relatively low electricity prices have attracted many steel, cement and chemical production technologies from other countries. Last year, Vietnam’s power demand jumped around 16 percent while supply only rose 12 percent, forcing the government to import electricity from China and rotate power outages across the country. Vietnam plans to generate about 83.3 billion kWh of power this year to support an economy forecast to grow by 6.5 percent. Reported by Ngan Anh – Xuan Toan

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