Central bank to ‘manage’ currency to narrow trade deficit

The State Bank of Vietnam will pursue a monetary policy that may help narrow the country’s trade deficit amid concerns the economy may slow further.

“The State Bank is closely watching the market’s development to flexibly manage the dong’s exchange rate to help keep the trade deficit under control,” a statement on the central bank’s website said.

The government has cut its growth target to 6.7 percent for this year and 6.5 percent next year, compared with 8.5 percent in 2007. The trade gap in the first 11 months widened 56 percent to US$16.9 billion, with export growth slowing as stagnant global economies cut demand for the nation’s products.

“Other countries have been affected by the global financial turmoil more on the financial side,” Martin Rama, acting country director for the World Bank in Vietnam, said in Hanoi Friday.

“For Vietnam, the main question will have to do with exports and foreign investment.”

The State Bank set its reference rate for Friday’s dong trading at VND16,483 per dollar, compared with VND16,479 on November 24.

Banks are allowed to trade the currency by up to 3 percent on either side of the official rate. The dong traded at VND17,180 to VND17,230 in the free market in Hanoi, the central bank said in the statement, which reviewed this week’s money market.

Source: Bloomberg

Eximbank cancels 2009 listing on financial turmoil

Vietnam Export-Import Commercial Joint-Stock Bank, partly owned by Sumitomo Mitsui Financial Group Inc., has canceled its plan to list shares next year due to the global financial crisis.

“It is not a good time to list next year given both the domestic and world financial situations,” Le Thi Hoa, vice chairwoman of the lender known as Eximbank, said in an interview in Ho Chi Minh City Sunday. “We will consider better timing and seek approval from our shareholders later.”

The benchmark VN-Index has plunged 67 percent this year as foreign investors retreat from emerging markets amid a global recession. The government on November 6 lowered its growth target for next year to 6.5 percent from an earlier 7 percent.

The HCMC-based lender also reduced its registered capital target this year to VND7.2 trillion (US$425.5 million) from VND7.38 trillion ($436.1 million) planned in March, according to general director Truong Van Phuoc.

The bank would sell 297 million shares worth VND2.97 trillion next month to existing shareholders, Phuoc said.

As of the end of October, Eximbank had total assets of VND49.6 trillion ($2.9 billion) and its registered capital was VND4.2 trillion ($248.2 million), a 50 percent jump since the beginning of the year, according to a report released at a shareholders’ meeting Sunday.

Pretax profit was VND1.2 trillion ($71 million) in the first 10 months, an increase of 116 percent from a year earlier, the report said.

Eximbank has outstanding property loans of VND4 trillion ($236 million), or 18.2 percent of its outstanding debts, at the end of November, according to Phuoc.

It has sold a 15 percent stake to Sumitomo Mitsui, Japan’s third-largest bank by revenue, 5 percent to VOF Investment Ltd. of Virgin Islands, 4.5 percent to Mirae Asset Exim Investment Ltd. of South Korea, and 0.5 percent to Mirae Asset Maps Opportunity Vietnam Equity Balanced Fund 1, according to the report.

Source: Bloomberg

Agribank to help exporters buy 600,000 tons of rice

The central bank on Friday asked state-owned Bank for Agriculture and Rural Development (Agribank) to offer its cheapest loans to help exporters buy up to 600,000 tons of rice from local farmers.

Vietnam, the world's second-biggest rice exporter, is facing a rice glut, lower prices and reduced earnings for farmers, after it restricted exports earlier this year amid fear of a possible shortfall.

Agribank will offer loans at its “lowest lending rate” to Vietnam Southern Food Corp. and Vietnam Northern Food Corp., according to a statement on the State Bank of Vietnam’s website on Friday.

The government will pay the loans’ interest, the statement said.

Prime Minister Nguyen Tan Dung said earlier this month that Vietnam has 900,000 tons of rice in stock.

Vietnam had exported 4.39 million tons of rice, he said, adding the country expects to ship one million tons of rice abroad in the year’s last two months, raising the total export volume this year to five million tons, up about 25 percent over last year.

Higher rice shipments may help Vietnam sustain economic growth after the government pared targets for expansion this year because of surging inflation, a widening trade deficit and the global financial crisis.

Source: Thanh Nien

Vietcombank

Vietcombank, Vietnam's largest partly private bank, said Friday it would make a maiden dividend payment at the end of December, even though it has asked for shareholder approval to halve its 2008 credit growth forecast.

Hanoi-based unlisted Vietcombank, or the Commercial Joint Stock Bank for Foreign Trade of Vietnam, would pay an annualized dividend of 12 percent for a seven-month period ending this December, Chairman Nguyen Hoa Binh said in a statement.

Vietcombank completed the procedures to convert itself into a joint stock bank after it became the first state-run bank to conduct an initial public offering last December, raising US$652 million from selling 6.5 percent of its total shares.

The bank asked shareholders earlier this month to approve halving its credit growth projection this year to 15 percent from 29 percent, a sign that Vietcombank, which handles a quarter of Vietnam's trade payments, is feeling the effects of the global economic slowdown.

Vietcombank said it would pay the dividend in cash on December 25 for shareholders who registered by December 1. It gave no further details.

Vietnamese companies often pay dividends at the end of each half, but Vietcombank did not explain why it was launching a dividend program at this point.

Plans for a domestic listing in June 2008 have been delayed and Vietcombank has yet to give a new date.

Source: Reuters

Bankers find SME customers most attractive

In a complete about-face from earlier this year, lenders are now falling over themselves to grant business loans, especial to smaller firms – as long as they can meet eligibility requirements.

Small- and medium-sized enterprises (SMEs) are now the target customers of local banks, which should be focusing on providing more services to meet their needs, bankers have said.

Speaking at a conference in Hanoi last week, Deputy Governor of the State Bank of Vietnam Nguyen Dong Tien said many SMEs often complained that they found it difficult to get bank loans without stopping to think why.

Statistics showed that only 15 percent of applications for loans are rejected, mainly because the companies who lodged them didn’t meet eligibility requirements, Tien said.

The Vietnam Industry and Trade Bank, or VietinBank, said the loans given to SMEs stood at about VND45 trillion (US$2.6 billion), accounting for 40 percent of its total loans.

OceanBank said 80 percent of its loans were to SMEs.

State-run Agribank, Vietnam’s largest lender, said credit growth for SMEs at the bank in the first 10 months increased by 14 percent over the same period last year.

All bankers attending the conference said they considered SMEs their target customers and they always tried to have flexible lending policies to attract more SME customers.

SMEs, or businesses with a capital of less than VND10 billion ($590,000) or having less than 300 employees, comprise around 90 percent of all enterprises in Vietnam. According to statistics released at another forum during last week’s SME National Week 2008 in Hanoi, SMEs have contributed more than 40 percent of the country’s gross domestic product and created jobs for nearly 3.4 million people.

Nguyen Thi Lan Anh, head of customer service at VietinBank, said there was no difference between a large and a small company and the only thing that mattered to banks was whether a company was creditworthy or not.

Even though VietinBank aims to become a leading bank in providing services to SMEs, it cannot give loans to companies without a strong equity base, transparent financial reporting and a feasible business plan, Anh said, noting it was important for them to show that they could meet the repayments.

Many bankers said businesses should stop thinking that they are asking for money and whether they are granted loans or not is a measure of the generosity of the banks.

Sacombank Chairman Dang Van Thanh said SMEs need to be more confident in their relationship with banks because they were the most attractive customers of not only banks but also other financial institutions.

Investment firm VinaCapital, for instance, said it was planning to boost investment into unlisted companies, most of which are SMEs.

The competition among financial institutions is fierce as they all want to attract as many SME clients as possible.

Agribank said it would cooperate with industry associations and provide long-term loans for SMEs to upgrade their production technologies.

Both OceanBank and Sacombank have recently launched new services to help SMEs restructure their financial systems.

Meanwhile, VietinBank said it is completing a credit rating system so that it can make lending decisions more easily later.

“If banks diversify their products and introduce suitable services to SMEs, they will be able to open the door to the most promising credit market,” OceanBank Chairman Ha Van Tham said.

With credit growth recently slowing down, the need to attract more SME customers has become even more urgent for banks. Many banks said they are having difficulties managing a surplus of capital set aside for loans.

Trang Thi Thuy Lien, general director of Lien Phat Footwear Company, said many SMEs like hers are not seeking bank loans at the moment.

The global economic slowdown has hurt the company’s exports to Europe and so it was cutting back on production, rather than expanding, she said.

Mai Tong Ba, director of Asia Commercial Bank’s Saigon Branch, said there were no businesses applying for new loans at the branch and its credit growth was now only about 20 percent over the same period last year.

Huynh Song Hao, deputy director of Vietcombank Ho Chi Minh City, said although banks have lowered lending rates, businesses don’t want to borrow.

The State Bank of Vietnam cut three percentage points off its benchmark rate in the four weeks to November 20, prompting commercial banks to lower their lending rates.

The current lending rates among commercial banks are 14-15 percent per year. Last year, the highest annual rate was 12 percent.

Source: TBKTSG

Japan firm gets nod for $5 bil. steel plant feasibility study

Vietnam has allowed Japan’s JFE Steel Corporation, the world’s third-largest steel manufacturer, to conduct a feasibility study for a US$5 billion steel complex in the central province of Quang Ngai.

A statement posted on the government website on Wednesday said Deputy Prime Minister Hoang Trung Hai called for including the project schedule, kinds of products, market details, energy needs, and infrastructure requirements in the study.

After considering the study, the government would make a decision on the project, the statement said, without offering a timeframe.

The plant is expected to produce 6-10 million tons a year, it said, citing Akihiko Ishida, head of JFE Steel’s Planning and Cooperation Department.

Gas produced as by-product during the steel manufacturing process will be collected to feed the plant and sell to other businesses in the economic zone, as well as local consumers.

Source: Thanh Nien

Central bank says no to charging ATM transactions

The State Bank of Vietnam rejected for the second time in five months a proposal by commercial banks to charge customers for using automated teller machines (ATMs).

The governor Nguyen Van Giau said in a statement posted on the central bank’s website that he rejected it considering the low quality of the country’s ATM networks.

The 20-member Vietnam Bank Card Association (VBCA) earlier this month sought the central bank’s approval to charge customers for using ATMs from December 1.

The banks wanted to charge VND1,000 per transaction, chairwoman Nguyen Thu Ha said. She called it a reasonable demand since banks spend a lot of money on setting up and maintaining their ATM networks, adding an ATM costs around US$30,000 not counting maintenance costs.

The VBCA had first sought to introduce the charge last June but the central bank wanted it deferred because of the economic slowdown, she said.

Reported by Hoang Uy

Consumers have it good as electronics prices crash

The global economic slump has forced producers and distributors of electrical and electronic goods to cut prices, offering consumers a windfall.

But belt-tightening potential buyers have been buying less and less, retailers said, adding the little they buy has been in the low-priced segment.

Since the beginning of this month, retailers in Ho Chi Minh City and Hanoi have joined hands with producers to cut prices by 10-40 percent.

Liquid crystal display (LCD) and Plasma television sets, just two years ago a luxury product, have now come within the reach of many. The prices of the most popular 32-inch LCD TVs are now between VND6.9 million (US$406) and 7.9 million ($465).

Robert Vu, marketing director of Samsung Vietnam Electronics Company, said the LCD TV prices in Vietnam are 15-20 percent lower than in other regional countries.

Digital cameras, recorders, refrigerators and washing machines have also become 10 percent cheaper since last month.

Vu said the price cut is partly due to the rapid technological evolution, which quickly makes products outdated.

But Mai Duy Bao, marketing director at Philips Vietnam, said the main reason for the falling prices is the pressure on revenues.

“Firms are under pressure to achieve the year’s revenue targets,” he said.

Newswire VietnamNet said in a report last week that some producers and importers of LCD TVs substantially increased their stocks this year based on the good sales last year.

But with inflation taking a toll this year, sales have halved, leaving huge stocks unsold and producers with no choice but to slash prices.

Retailers have helped slash prices by cutting expenses on advertising and marketing.

“Producers and retailers have cut costs as much as possible and have had to forgo profits to keep customers,” Nguyen Minh Thu, marketing and trade director of Thien Hoa retail chain, said.

The VietnamNet report quoted Ngo Thanh Dat, marketing director of the Hanoi-based Pico Plaza retailing center, as saying prices would go down even further from next month as retailers launch intensive promotion campaigns for Tet.

Dat expected the campaigns to focus on price cuts rather than offer gifts or raffle tickets to attract customers.

But for the moment sales remain sluggish, retailers said. Hoang Ngoc Vy, director of Vien Thong A mobile phone chain, said her company’s sales have halved this year.

Besides their fear of continuing inflation and the risk of economic slowdown, many consumers are also expecting prices to fall further, Bui Minh Thu of Gia Thanh retailing center in HCMC said.

Under Vietnam’s commitments to the World Trade Organization, it is set to cut import duties substantially on electrical, electronic, telecom and information technology products in the new year.

Three million or less

In a report last month, market research firm GfK Vietnam revised its forecast of consumer durable sales this year to $3.9 billion, down from its June forecast of $4.07 billion.

Tran Khoa Van, GfK’s country manager, said high inflation has hit purchasing power as consumers grapple with the high costs of food, clothes, travel and entertainment.

Retailers said the last quarter is set to see mostly sales of low-cost electrical and electronic goods.

Most customers buy low-cost cathode-ray-tube TVs, washing machines, fans and irons, a salesperson at Cho Lon supermarket in District 5 said.

Major retailers said goods priced at under VND3 million accounted for up to 75 percent of total sales.

Source: TN, Agencies

VN holds onto its pepper crown

VietNamNet Bridge - Viet Nam will remain the world’s leading pepper exporter with a more than 50 per cent share of the global market despite a drop in output against last year, according to the Viet Nam Pepper Association.

Unfavorable weather and diseases led to an output fall of 10-15 per cent in other major exporting nations, such as India and Brazil too, the association said.

Viet Nam expects to earn US$290 million from exporting 80,000 tonnes this year.

Viet Nam, Sri Lanka, and Indonesia soon plan to launch a joint project to improve production, quality, processing, and promotion of pepper.

Viet Nam has 10 pepper processing plants measuring up to standards set by the American Spice Trade Association and the European Spice Association.

But most Vietnamese pepper producers fail to develop their brand to add value to their produce, Do Ha Nam, the VPA chairman, admitted.

Of the six main pepper-growing areas in the country - Binh Phuoc, Gia Lai, Dac Nong, Dong Nai, Ba Ria-Vung Tau, and Dac Lac Provinces, only Gia Lai has managed to establish a trademark, the Chu Se [Black] brand of pepper grown in Chu Se District, Nam said.

The association said Vietnamese pepper could fetch up to $5,000 per tonne instead of the current average price of $3,500 if the country works on its trademark.

The Ministry of Agriculture and Rural Development has told the industry not to increase the area under pepper from the current 50,000 ha and maintain an annual output of around 100,000 tonnes.

But farmers must adopt good agricultural techniques and processors and exporters must follow Good Agricultural Practice, or GAP, standards to ensure the best quality, it said.

(Source: VNS)

Swedish diplomat: ODA-related corruption unacceptable

VietNamNet Bridge – Corruption in ODA-funded projects is unacceptable, the counsellor of the Swedish Embassy in Vietnam, Molly Lien, told VietNamNet ahead of the anti-corruption dialogue between international donors and the Vietnamese government tomorrow, November 28.

What do you think about the suspension of Huynh Ngoc Sy, Deputy Director of the HCM City Department of Transportation, for allegedly taking a bribe from a Japanese business in the ODA-funded East-West avenue project?

One should not be considered guilty till investigation is completed and after a fair trial. But if there are criminal doubts associated with that person, the government should make decisions like suspending that person while waiting for investigation results.

At the upcoming anti-corruption dialogue between the Vietnamese government and international donors under the Consultative Group Meeting (CG), will donors mention anti-corruption measures in using ODA?

Corruption in ODA-funded projects is unacceptable. Sweden’s ODA, for example, is tax money paid by each Swedish citizen to the Swedish government. ODA is used to assist other countries like Vietnam to eradicate hunger and reduce poverty, to build a democratic society without corruption.

Donors will always pay attention to and worry if ODA is not used for the above purposes. This issue was discussed at anti-corruption dialogues and CG meetings in the past and it may be discussed again at the upcoming dialogue and CG meeting.

The scandal related to the East West avenue project came from Japanese newspapers. It is said that at the upcoming dialogue, donors will suggest heightening the role of the Vietnamese media in preventing and combating corruption. Why are donors interested in this?

The press is seen as a key factor in the fight against corruption. This is recognised by Vietnam and clearly stated in the Law on Corruption Prevention and the draft national corruption fighting strategy.

We believe that to effectively do its mission, the press must have adequate access to information. The press must be allowed to honestly report every issue, both positive and negative, related to corruption and corruption prevention.

How do Sweden and international donors observe corruption prevention in Vietnam recently?

It is important that corruption fighting agencies have sufficient resources and capability to do their job effectively. The role and responsibility of agencies must be clear. However, corruption supervision and prevention should not be only the mission of specialised agencies, the government, or ministries and local authorities. It is necessary to mobilise the press, social organisations and citizens to become involved in corruption prevention.

The number of corruption cases discovered in 2008 is 14 less than last year, with 379 cases in total. What do you think about this?

We can understand that the number of corruption cases this year has been less than last year but we can also understand that there are many more cases than the above number that are undetected. It is difficult to give a comprehensive comment about the result of a certain period of time. In my opinion, there seems to be a gap between laws and practical actions related to this issue.

I think, to discover more corruption cases, it is necessary to ensure that everybody who works in the public, the private sectors, the press and individuals can widely make public information related to corruption cases that they know of. They must be assured that the agencies that they provide corruption-related information to have the power of action and are ready to process the information.

The Vietnamese government has completed the draft national strategy on corruption prevention to 2020. What do Sweden and the international community expect from this document?

We expect that such a strategy will reflect a corruption fighting model in Vietnam’s practical conditions.

Though I have not read the last draft strategy I hope that when it is approved, the strategy will convey a strong message that Vietnam will not accept corruption anymore even in small cases that affect people’s lives, particularly the poor.

Whatever model the Vietnamese government uses to fight corruption, Sweden and donors always wish to help Vietnam to effectively implement its corruption fighting policy.

The Vietnamese National Assembly suggested designing a law to concretise the United Nations’ regulation on controlling government officials’ assets. What is your viewpoint about this?

In Vietnam, income comes from different sources. Besides salary, government officials have other sources of income which are very difficult to control. There are government officials whose incomes are moderate but they have houses, so the question is, where did the money come from?

Any effort promoting transparency and control of government officials’ incomes is important. However, when issuing any regulation, we need to think about how it will be implemented. It is also important to think about where it should start to be implemented and how.

One of the reasons for corruption is the moral degradation of some government employees. What is your advice to Vietnam to solve this matter?

In Sweden, one of the key factors to diminish corruption is transparency in the government and the public sector to maximally lessen the opportunity for state officials to take bribes.

Vietnam can learn experience of the international community, of neighbouring countries like Singapore. Singapore had a very high corruption rate but today, they have a team of professional and spotless state employees. What is the reason for their success?

Interviewer: Xuan Linh

Stimulating demand needs to accompany reform: economist

VietNamNet Bridge – Dr Le Dang Doanh, a senior economist and member of the Vietnam Development Studies Institute, said that as economic growth is currently slowing down and production is becoming stagnant, it is necessary to take measures to stimulate demand.

Inflation rate estimated at 22% in 2008: MPI

MPI: Not yet to conclude if deflation is the threat

The consumer price index (CPI) has decreased continuously in the last two months

The consumer price index (CPI) has decreased continuously in the last two months, contrary to the rule that prices always go up at the end of the year.

The CPI decreases prove to be consistent with the world’s price decreases and bountiful domestic crops. A recession occurs only when there is a minus economic growth rate for two consecutive quarters, and deflation occurs only when there are minus CPI increases for a whole year.

Nevertheless, for a nation which sees its population increase by 1mil people a year like Vietnam, the economic growth rate must be 4% at least to ensure enough food and livelihoods for people. Therefore, when economic growth slows down and production becomes stagnant, the stimulation of demand becomes necessary.

The government is now trying to stimulate demand. What do you think the plan should emphasise?

The worrying thing now is the sharp decrease of economic growth and exports. A considerable number of small- and medium-size enterprises have been dying slowly. A lot of automobile manufacturers are working one day only a week. A lot of trade villages have been paralysed.

The demand stimulus plan needs to aim to settle production stagnation, not aim at increasing the CPI. The first subject that the demand stimulus should aim at is the farmer, but it is not easy to do that, as Vietnamese farmers have just suffered heavily. In order to maintain production, the state should assist them by providing capital, minimising fees and charges, giving plant varieties and support in irrigation. The state should also freeze and extend debts for farmers as it has been doing with businesses.

I think it is also necessary to resume credit for real estate projects which are nearly completed, but it is not necessary to stimulate consumer credit. We should learn a lesson from the US, where people can borrow money at low cost and push up consumption, leading to crisis.

So, it is clear about the subjects for the demand stimulus plan. However, do you think that the demand stimulus plan will succeed if the way of stimulating remains the same?

The stimulation of demand in investment and construction as suggested by the Ministry of Planning and Investment may cause capital loss. Therefore, we should focus on effective construction works which can create money after they are operational. The demand stimulus needs to go together with reform. Investment information needs to be made public. Until the ‘ask-and-grant’ mechanism exists, the demand stimulus plan will not be effective due to high investment costs.

The most important thing for small- and medium-size enterprises is that the state can help them reduce ‘underground costs’. This will bring higher efficiency than providing capital. A recent survey showed that cutting administrative procedures by 40% would help reduce expenses by VND13-30tril. I think just a half of the sum would be enough to help businessmen ‘wake up’.

Do you think that in the current conditions, it would be useless if we only stimulate production, as there is no demand?

The state plays a very important role in helping businesses seek markets, reduce costs and heighten their competitiveness. Businesses themselves, I think, also need to restructure commodities, join forces with each other, accept lower sale prices to share difficulties with customers for the benefit of both.

When economic growth slows down, other countries always slash taxes in order to help people overcome difficulties. Do you think that Vietnam should reconsider the real estate tax and personal income tax?

I strongly recommend exempting taxes for people in natural calamity areas.

In the immediate time, Vietnam should have an upright social security policy, as the number of unemployed will increase. In China, economic groups have to reserve sums of money to help eliminate hunger and reduce poverty. Vietnam should follow the model. Regarding tax collection, I think the state should tax when people become well off and have accumulated things. We cannot delay the time for the personal income tax law’s implementation, but we can re-calculate the family rebates.

(Source: Tuoi tre)

Fabregas - I am inspired by 'amazing' Adams

By Declan Taylor

Cesc Fabregas will take inspiration from Tony Adams as he bids to captain Arsenal to their first silverware since 2005.

Like Fabregas, Arsenal legend Adams was 21 when he was handed the captain’s armband by then manager George Graham. ‘Mr Arsenal’ went on to captain the side for 14 years, becoming the first skipper in English football to secure League titles in three different decades (1988/89, 1997/98 and 2001/02).

Although Fabregas admits that achieving just half of what Adams did as the captain would be ‘amazing’, he was keen to highlight the importance of forging his own path with the armband.

“From what people say he was amazing,” said the 21-year-old after Tuesday’s victory over Dynamo Kyiv. “I never really saw him play because I was too young but from what people say he was amazing and everybody says amazing things about him.

“Hopefully one day - not so much be like him, because I like to be my own player and person - but of course I want to achieve the things that he achieved.”

“I want to lift a trophy. At the end of the season we will see what we can achieve. At the moment we are in all of the competitions, people can say whatever they want about the title race but we have only played 14 games. It is not over yet and it is up to us to finish where we will finish. We will see, at the moment nothing is done and we will fight until the end.”

After suffering their fifth Premier League defeat of the season on Saturday, many questioned Arsenal’s ability to overcome the 10-point gap between them and leaders Chelsea and suggested that the Champions League was a more realistic aim for the Gunners. Not so according to Fabregas.

“Well Europe is a different game to the Premier League,” said the midfielder. “All the teams in the League know that they have to defend a lot and put pressure on us all the time, it is as if all week they train on only defending.

“Of course in the Champions League it is a little bit different, teams like to play a bit more and come out a bit more. Maybe it is true that it suits us a little bit more but as I said, if you want to win something you must be able to play against anybody.”

[Wednesday, November 26, 2008]

Distributors milking consumers, dairy insiders say

Dairy products have become more expensive of late but industry insiders claim the price hikes are a marketing ploy by producers and distributors.

Distributors have increased the retail prices of milk powder by VND10,000 to VND30,000 for a 900-gram pack over the past few weeks.

But global prices of skimmed milk powder and whole milk powder have actually fallen by US$1,000 per ton since mid-year to respectively $2,000-2,500 and $2,400-2,900.

Pham Ngoc Chau, deputy director of Hancofood, said distributors and local milk producers have increased their prices because they want to make up for marketing and advertising costs.

“When they say they’ve added new components, it’s simply an advertising trick,” Chau said.

A manager of one of the top milk companies, who wished to remain unnamed, said the recent melamine scare has led to consumers not “trusting” products at lower price ranges.

His company, for instance, was unable to sell its VND70,000 products but sales improved significantly when distributors decided to double the price, he said.

Local retailers say the competition among big names like Abbott, Mead Johnson, Dutch Lady, Dumex and even Vinamilk is mostly in the upscale products segment, including milk products advertised to be able to bolster children’s immune systems and smartness.

With customers in this market segment highly loyal to brands, sellers raise prices without fear of alienating them.

Bui Bich Thy, who works for an insurance company, now spends at least an additional VND100,000 every month on milk powder.

“I had no choice but continue to buy Pediasure,” she said. “My kid just won’t drink any other milk.”

Le Huu Binh, deputy director of 3A Pharmaceutical Joint Stock Company, one of the main distributors for Abbott milk products in Vietnam, said Abbot’s Pediasure now retails at VND329,000 for 900 grams, nearly 9 percent higher than a few months ago.

The price was hiked partly because of Pediasure’s “new, impressive formula that will help kids add height and weight.”

A market insider said, “When [a company] sees another increasing price, immediately it has to figure out a way to do the same.”

MILK PRICES TO SURGE DUE TO LIMITED LOCAL SUPPLY A Vietnamese household consumes 900 grams of milk per month, including fresh milk, condensed milk and milk powder. As local supplies cannot meet the demand, Vietnam imports a large quantity of milk products from around 40 countries, mainly the Netherlands, New Zealand, the US, Malaysia, Thailand, Poland and France. The annual growth rate of imported milk and milk products was around 27 percent in the period from 2002 to 2007. In the first eight months this year imports of dairy products were worth US$356.7 million, almost the same as the whole of last year. According to the Animal Husbandry Department, the prolonged cold spell early this year killed more than 30,000 heads of cattle in the northern and central regions, where most of the country’s milk is produced. As a result, local businesses had to increase import of milk products. Following the Chinese melamine-tainted milk scare, consumers have cut their spending on fresh milk and other dairy products, even though Chinese milk products only have a 1 percent market share in Vietnam. Both dairy farmers and producers have been hit hard by this. Under its WTO commitments, Vietnam has lowered tariffs on dairy imports. Exporters in China and Southeast Asian countries get especially preferential treatment. But they have not succeeded in expanding their market shares here despite being more competitive. With the melamine scare fading away and businesses launching many promotions to boost demand, the consumption of milk products will increase again soon, especially with the living standards of consumers improving. But local supply will continue to fall short of increasing demand. As a result, Vietnam will still need to depend on milk products imported from the Netherlands, New Zealand, the US, Poland and France. By Ngo Vi Dung* (TBKTSG) * Ngo Vi Dung is a researcher at the Information Center for Agriculture and Rural Development (Agroinfo), an arm of the Ministry of Agriculture and Rural Development.

Source: TT, SGTT

The global economy is expected to go through more difficulties next year and this will affect FDI flows into Vietnam as well as the country’s e

The global economy is expected to go through more difficulties next year and this will affect FDI flows into Vietnam as well as the country’s exports, Prime Minister Nguyen Tan Dung said at a meeting last Monday.

The global economy is estimated to grow at 2.2 percent next year from an anticipated 3.7 percent this year, according to the International Monetary Fund.

The US, Japan and European countries, Vietnam’s biggest importers, are expected to see an economic slowdown and reduced purchasing power, impacting Vietnamese exports.

But the Vietnamese government is reconciled to a slower pace of export growth of 13 percent next year. This year export revenues will rise 31.8 percent to US$64 billion, the Government Office forecasts.

Member of the National Monetary Advisory Council, Vo Dai Luoc, said, “In the context of deeper international integration, we should not make light of the current crisis.”

Many countries have decided to spend huge amounts of money to rescue their economies but Vietnam has not done so, he said, adding that the risk of deflation could also threaten the economy next year.

Deflation is dangerous to an economy because when prices are falling, consumers have an incentive to delay purchases until prices fall further, which in turn reduces overall economic activity, setting off a deflationary spiral.

Consumer prices are estimated to drop 0.76 percent this month on the back of lower fuel and food prices.

The year-on-year inflation growth slowed to 24.22 percent in November, according to the General Statistics Office (GSO). It was 26.72 percent in October.

However, the rate of inflation since the beginning of this year remains high at 23.25 percent, the GSO said.

Eighty percent of small and medium-sized enterprises, which account for 95 percent of firms in Vietnam, are having difficulty finding markets for their products due to the economic meltdown and lack funds to remain in operation as a result of the recent tight monetary policy, according to the Vietnam Association of Small-and Medium-Sized Enterprises.

Some experts said that the next few months could see some of them going bankrupt.

To overcome these challenges, the government should take comprehensive and long-term measures, experts said.

“We should take advantage of the lower prices of fuel and construction materials to develop infrastructure,” Luoc said.

He also suggested that exports should be boosted to regions less affected by the crisis, like the Middle East and Latin America.

The government targets economic growth of 6.5 percent next year against an anticipated 6.7 percent this year.

Reported by Ngan Anh

Cashew producers abandoning $1bil dream

VietNamNet Bridge – The Vietnam Cashew Association (Vinacas) has called for help to overcome its current difficulties. With continued losses, cashew producers have given up the dream of becoming a member of the ‘$1bil club’, the industries which have the export turnover of $1bil and higher.

The Vietnam Cashew Association has called for help to overcome its current difficulties

Cashew producers have been in desperate straits because of objective difficulties, and because of… themselves. They have borrowed a lot of money from banks to import cashew materials at high prices for domestic processing but they have not used all the imported materials. As cashew nut prices have been decreasing, the more they produce, the more they lose.

Objective difficulties

In a dispatch sent on November 20 to the Prime Minister, Ministry of Finance and State Bank of Vietnam, Vinacas said that the cashew nut exports to key markets like the US and EU have been decreasing dramatically in the last months of 2008 to just 60% of the same period of 2007. Meanwhile, export prices have dropped sharply by $2,000, from $6,500 to $4,500/tonne.

Cashew processors have had to borrow VND8,000bil from banks to collect materials for processing. However, sales of finished products have been very slow, making it difficult for businesses to pay bank debts.

Meanwhile, according to Vinacas, enterprises have been unable to get tax refunds due to the fact that importers are tardy in making payments.

Going in for fraud, exporters hurt themselves

In fact, exporters have also been killing themselves.

In mid 2008, foreign cashew nut importers threatened to sue Vietnamese exporters for breaking contracts. Vietnamese exporters did not deliver products under the signed contracts, but sold products to others when the prices went up. The exporters planned to fulfill the contracts later, but they could not do that as the material prices increased sharply. If they still purchase materials to fulfill the contracts, they would suffer the loss of VND176bil.

Therefore, cashew producers have sent dispatches to relevant ministries, asking for tax reductions to help the cashew processing industry survive.

Cashew processors also came up with the clever ‘initiative’ of using 502 glue to repair broken cashew nuts. As importers discovered the fraud, they refused the consignments.

$1bil in export turnover? Just a dream

The continued failures in business have prompted farmers to give up growing cashews. The income brought by cashew growing is about VND20mil/ha, lower than rubber, at VND60-70mil/ha, and cocoa VND70mil/ha.

In cashew-growing areas like Binh Thuan, Binh Phuoc and Binh Dinh, farmers have chopped down cashews to grow other plants.

The Ministry of Agriculture and Rural Development has forecast that the cashew growing area will be 400,000 ha instead of 450,000 ha as previously forecast. Meanwhile, cashew enterprises cannot use imported materials, as they have to bear high interest rates for bank loans, while market prices always fluctuate.

As such, the dream of exporting $1bil worth of cashew products by 2010 may not come true.

Low interest rates keep people from depositing

VietNamNet Bridge – The continuously decreasing deposit interest rates have prompted people to inject money in other channels including gold, foreign currencies and stocks instead of in banks.

A lot of people who keep cash now regret not making deposits one month ago when they could enjoy the high interest rates of 15-16% per annum. The rates have dropped to 11-12.5% per annum now.

As the bank deposit interest rates have been decreasing sharply, depositing is not the top choice of people anymore. According to the General Director of Asia Commercial Bank ACB Ly Xuan Hai, the capital flowing to ACB and other banks has been slowing down. Meanwhile, according to the HCM City Statistics Office, the capital mobilised by commercial banks in the city in November was VND559,208bil, a modest increase of only 0.4% over the previous month.

Some bankers say that a lot of clients, who have incomes in dollars, previously preferred converting the money into VND to make deposits in VND to enjoy high interest rates, but now they make deposits in US$.

The bankers say that in the past year, people have responded very promptly to changes in the market.

For example, earlier this year, when the VND deposit interest rates increased sharply, a lot of people withdrew money from long-term deposits to make short-term deposits with higher interest rates. In mid year, when the VND/US$ exchange rate increased rapidly (the rate hit VND19,000/US$1), people withdrew VND deposits to purchase dollars to make dollar deposits at banks. When the gold price soared at the beginning of the year, a lot of people withdrew money to purchase gold and make deposits in gold.

However, economists still believe that there is no need to shift from VND deposits to US$ deposits at this moment.

“Making VND deposits proves to be more profitable than US$ deposits,” an economist said. VND depositors still can enjoy interest rates two-fold higher than those of US$ deposits. The highest rate offered for US$ deposits is now 5.75% per annum, while the highest rate for VND deposits remains at 12% per annum.

The economists say that inflation is now not a big concern anymore; therefore, depositors should not worry about the devaluation of the VND. The State Bank of Vietnam has many times confirmed that it would take action to stabilise the value of currencies in order to stabilise the national economy.

In fact, there are many other investment channels than simply VND or US$ deposits, including gold, real estate and stocks.

Investors may think of injecting money in stocks as stock prices have stopped falling, and more importantly, they may be attracted by the high dividends paid by listing companies. It is expected that the cash flow will go to the stock market when bank interest rates become unattractive.

General Director of SJC Securities Company Huynh Anh Tuan said the current market liquidity is not suitable for surfing investors. However, it is reasonable for long-term investments.

The gold price has been on the rise after exceeding the $800/oz threshold late last week. Huynh Trung Khanh, Senior Advisor to the World’s Gold Council in Vietnam, said there is likely to be a new price increase wave at the end of November or early December, when jewellery producers collect material gold for production. He said that the gold price is forecast to march closely towards the $900/oz threshold.

(Source: DTCK)

Bandmaster in the age of inflation

VietNamNet Bridge – “Today, I can say that the top goal – controlling inflation – has been realised. This judgment is not subjective, but very practical. If we don’t make that judgment and continue focusing on inflation, it would be terrible,” said Prime Minister Nguyen Tan Dung.

Dung made the above comment seven months after he signed a document setting forth seven groups of measures to control inflation and stabilise macroeconomics. But to get those measures required some effort.

In early months of the year, some cabinet members still wanted to maintain the goal of high economic growth, arguing that the Vietnamese economy got a boom in 2007, one year after joining the World Trade Organization (WTO), and this growth impetus needed to be maintained in 2008.

However, bad signs began to appear. The trade deficit of the first quarter was equivalent to that of the entire 2007; interest rates were much lower than inflation; there were wild fluctuations of exchange rates, etc. Identifying difficulties to change economic goals when optimistic thinking dominated was a great difficulty.

“At that time a question was posed: Is it necessary to set the goal of controlling inflation or still give priority to the goal of economic growth? That was a hard question,” the Prime Minister said during a meeting of officials of the Ministry of Planning and Investment (MoPI) last week.

The MoPI is responsible for designing annual economic development plans. The cooperation between this agency and others, especially the State Bank of Vietnam and the Ministry of Finance, sometimes was not very good, Minister Vo Hong Phuc admitted, leading to wrong assessments about the economy.

It was not until March 2008 that the MoPI received data about the total means of payment and outstanding debts in 2007, the main causes of high inflation, from the State Bank of Vietnam.

The data “scared” the Prime Minister, as Minister Phuc told the National Assembly in May.

At that time, some officials proposed assigning the task of designing social-economic development programmes to the Ministry of Finance and the State Bank of Vietnam, lessening the role of the MoPI. It is said that the Ministry of Finance and the State Bank of Vietnam “didn’t dare” accept this duty.

In that situation, a group of MoPI experts quietly designed a draft document on eight groups of solutions to curb inflation, including tightening monetary policies, reducing the trade deficit, etc.

The draft, after being considered by related ministries and approved by the Politburo and the National Assembly, was signed by the PM on April 17. A member of the compilation team said if the document had been issued much later, the current economic situation might have been very bad.

The PM re-confirmed the function of the MoPI as “a think-tank for social and economic development strategies of the country” in Decree 116 dated November 14, 2008.

Minister Phuc said the MoPI would try its best to carry out this role. The ministry is working on a plan to cope with economic slowdown next year to submit to the government later this month. One of the key measures may be stimulating investment and local consumption.

(Source: SGTT)

Vietnam moves into second place in apparel export to US

Vietnam’s apparel exports to the US will increase more than 8 percent this year to make it the second-largest exporter after China, the American Chamber of Commerce (Amcham) in Vietnam has said.

Vietnam was in fourth place in the list of suppliers to the US last year behind Mexico and India.

Amcham said US import of apparel from Vietnam is likely to exceed US$5 billion this year compared to $4.6 million last year.

The US buys around 58 percent of the country’s apparel exports, more than twice as much as Europe and Japan combined.

It also represents 42 percent of Vietnam’s total exports to the US.

US apparel imports from other countries has decreased this year.

China’s export to the US was down 0.24 percent, Mexico’s was down 11 percent, and India and Indonesia’s was down 0.93 percent and 1.16 percent by September, the chamber said.

The only strong performer besides Vietnam was Bangladesh, with an increase of 8.4 percent.

US retail sales in October were the worst in 35 years as consumers continued to cut spending sharply, and if this trend continues through the end of the year, total US import of apparel could show a 20 percent year-on-year fall in the last quarter, Amcham said.

Reported by Minh Quang

Inflation slows; will central bank cut rate yet again?

Vietnam’s inflation slowed for a third month in November, adding to speculation the central bank may cut interest rates for a fourth time this year to boost economic growth.

Consumer prices rose 24.2 percent from a year earlier, after gaining 26.7 percent in October, according to figures released Tuesday by the Hanoi-based General Statistics Office. Prices fell 0.76 percent from October, after declining 0.2 percent last month for the first time since March 2007.

The government usually releases economic data before the end of the reporting period based on estimates.

Decelerating inflation gives the State Bank of Vietnam more scope to reduce its key interest rate from 11 percent, making it cheaper for companies to borrow. The benchmark VN-Index extended losses this month on concern companies are struggling to keep production up, hurting economic growth.

“Should the inflation rate keep going down, the economy may be faced with deflation, and the central bank will definitely have to cut its key rate further,” said Cao Sy Kiem, head of the Vietnam Association for Small-and Medium-Sized Enterprises, and a central-bank governor from 1989 to 1997.

The government is trying to reignite economic growth after raising rates earlier this year to 14 percent, the highest in Asia. The State Bank trimmed a percentage point off its benchmark rate three times in the month through November 20, prompting commercial banks to lower their lending rates.

Slower growth

The government has revised down its forecast for inflation this year to 22 percent from 24 percent and said the economy would grow 6.7 percent as projected.

It had earlier slashed its growth target for this year to 6.7 percent from 9 percent amid signs recessions in the world’s biggest economies may hurt exports.

It aims to bring inflation below 15 percent next year, when the economy may grow 6.5 percent, according to Prime Minister Nguyen Tan Dung.

Economic expansion may slow to 5.5 percent in 2009 from 6.5 percent this year, Standard Chartered Bank said in research published after the latest interest-rate reduction on November 20. Policy makers will probably cut rates to 9 percent by the second quarter, according to Tai Hui, the London-based bank’s head of Southeast Asian economic research in Singapore.

“The central bank will need to lower interest rates to spur lending to enhance production and businesses,” Kiem said. “Slowing inflation is good for companies in this respect.”

Overseas shipments in the January-to-November period rose 34 percent to $58.5 billion, slowing from growth of 37 percent in the first 10 months, the General Statistics Office in Hanoi said Monday.

Inflation has slowed from 28.3 percent in August, the fastest pace since at least 1992, after the government raised interest rates and restricted lending.

Vietnam should keep lowering interest rates next year and manage the exchange rate flexibly in the face of a worsening global economy, PM Dung told parliament earlier this month.

Domestic demand

“Slowing consumer prices are generally quite good, since the government has still set fighting inflation as an important task for the year,” said Le Dang Doanh, a senior research fellow at Vietnam’s Institute of Development Studies in Hanoi. “However, there are some concerns about slowing inflation, because it shows in part that domestic demand is falling.”

Easing inflation may hurt earnings of farmers and exporters who imported materials when costs were high and now have to sell their products at lower prices, said Doanh, a former senior economist at the Ministry of Planning and Investment.

Food and foodstuff inflation eased for the fifth consecutive month to 37.6 percent year on year, in line "with lower food commodity prices around the globe over the last few months," HSBC economist Prakriti Sofat said.

Housing and construction inflation dropped to 14.7 percent versus 22.8 percent last month while transportation and communication also slowed to 19.3 percent from a peak of 26 percent in September and 24.8 percent in October.

Food, housing and construction costs and transportation and communication are three main components of the price basket.

Most other components saw increases, but the pace has moderated over the last two months, Sofat said.

The statistics office said average consumer prices in the first 11 months were 23.25 percent up from the same period last year, above the average annual rise of 23.15 percent in the first 10 months.