31 Aug 2012 Intellasia Finance Vietnam - Hong Kong Business ...

BUSINESS
Vietnam finance & business 31 August 2012
Cement plant's feet
caught in stone
They claimed that many businesses were in a fixed and going to declare bankruptcy.
They argued that there should be unfair treatment as the fee payment bid not apply to
foreign traders, who purchase nearly 50 percent of the country's total coffee volume
while enjoying many advantages such as rich capital sources, lower loan interest rates
and a much wider market.
In the meantime, the MARD and the Ministry of Industry and Trade have adopted
stricter export restrictions.
To qualify as an official exporter, a domestic business has to show that it has been
processing and exporting coffee for two consecutive years, and has shipped a minimum
of 5,000 tonnes each year.
Most small and medium sized enterprises in Vietnam considered these requirements
unrealistic.
The Buon Ma Thuot Coffee Association said 80 percent of their member businesses are
independent and they cannot meet the condition for coffee shipments.
In addition, the time required for processing and exporting coffee makes it difficult
even for large businesses to operate well.
As more than 150 businesses now only focus on exporting coffee instead of producing
it, it is urgent to apply compulsory conditions for them to refrain from competing unhealthily
and co-ordinate in stabilising the coffee industry.
http://english.vovnews.vn/Home/Coffee-exports-face-tough-challenges/20128/
141615.vov
31/AUG/2012 INTELLASIA | VIR
Economic hardships have proven tough for the $167 million northern Thai Nguyen cement
plant.
With a VND77 billion ($3.6 million) loss after more than a year up and running Thai
Nguyen Cement is at the crossroads, continuing its fading existence or going bust due
to financial distress.
Thai Nguyen Cement project, developed by Vinaincon, benefited from an array of
state incentives like concessionary loans, sourcing foreign loans with state guarantee,
borrowing from Ministry of Finance's (MoF) accumulation fund to pay foreign debts
and using commercial loans in a total sum reaching 95 per cent of the project's total investment
capital, tantamount to VND3.046 trillion ($145 million).
However, since construction took seven years, and sponsoring banks failed to arrange
capital as undertaken the project had to source part of its investment capital overseas
with Vietnamese government acting as underwriter.
Going into production at the time of economic slump when a raft of construction
projects faced delay, progress extension or being cut to save costs Thai Nguyen Cement
ran at less than 60 per cent designed capacity. By late 2011, the plant saw around
300,000 tonnes unsold stock of cement and clinker valued at VND113 billion ($5.3 million).
Thai Nguyen Cement currently does not have any capital sources to pay debts, according
to the MoF.
Thereby, in July 2011 as a guarantor the MoF had to pay over 4 million euros of Thai
Nguyen Cement due debt at France-based BNP Paribas.
To deal with the project's current financial woes, the MoF had proposed the Ministry
of Industry and Trade (MoIT) and developer Vinaincon three scenarios - letting the cement
plant go bust, shifting the plant to state cement conglomerate vicem or transferring
state capital part of the plant at developer Vinaincon to the State Capital
Investment Corporation (SCIC).
However, these three scenarios are perceived as ineffective at this point of time.
First, if the cement plant went bust, the state could loss a huge capital amount since it
is rather difficult to sell the project at its real value in current context.
Second, vicem did not want to acquire a project bogged down in debt like Thai Nguyen
Cement as it is also burdened with debts, according to vicem's chair Luong Quang
Khai.
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