Vietnam said on Thursday it has raised its economic growth target to between 9.1 percent and 9.2 percent next year from an earlier 8.7 percent, with the aim of boosting incomes and reducing poverty.
Prime Minister Nguyen Tan Dung told a cabinet meeting on Wednesday that GDP growth of 9 percent or more was attainable, the government said in a report on its Web site (www.chinhphu.gov.vn).
Dung told the cabinet that Vietnam should strive for an investment rate of 41-42 percent of GDP next year in development projects with priority given to attracting foreign investment, speeding privatisation, building highways, airports and ports.
"This is a breakthrough step to achieve industrialisation and modernisation," Dung said in the government report.
Vietnam has one of the fastest-growing economies after China, but needs big improvements in infrastructure to achieve its goal of becoming an industrialised country to compete in the regional and global economy.
The higher GDP growth target was aimed at raising Vietnam's per capita income to $1,000 in 2008 and cutting the number of poor families to 11 percent from 14.75 percent forecast for this year, Dung said.
Previously, the government had a per capita income target of $1,000 by 2010.
Government projections for 2008 are all above the targets set by the Planning and Investment Ministry (MPI), which aimed for GDP growth in 2008 of 8.6-8.9 percent and per capita income reaching $956 to $960, the ministry said in a report.
It forecast per capita income of $835 this year from $720 in 2006.
It said contribution from agriculture, fisheries and forestry to GDP next year would ease to 19 percent from 19.8 percent expected this year, while the industry and construction sectors would boost their part in GDP to 42.6 percent from 42.1 percent.
The service sector was also expected to increase its stake in GDP to 38.4 percent in 2008 from 38.1 percent in 2007.
This year GDP would grow 8.4 percent to 8.5 percent, above an initial target of 8.2-8.5 percent, thanks to faster growth in all sectors, the MPI report delivered to the cabinet said.
In April, the World Bank forecast Vietnam's GDP growth at 8 percent for both 2007 and 2008. The Asian Development Bank said in March the Southeast Asian economy would grow 8.5 percent next year after an 8.3 percent expansion this year.
Vietnam joined the World Trade Organisation in January but foreign investors say infrastructure in key sectors such as transport, energy, telecoms, banking and financial needs huge investment.
The government would pursue a stable exchange rate policy and keep inflation lower than GDP growth next year, the report said without elaborating.
Vietnam has been struggling to control inflation as foreign investment pour into one of the world's fastest-growing economies, with the central bank buying dollars to keep the dong from appreciating.
Source: Reuters
Showing posts with label Economy. Show all posts
Showing posts with label Economy. Show all posts
Thursday, September 06, 2007
Tuesday, September 04, 2007
Racing against time to achieve economic growth rate of 8.5%
To obtain the target for GDP growth rate of 8.5 percent set by the National Assembly and control the inflation rate, the Government and localities must make more effort and introduce stronger measures.
Earlier August 2007, Doctor Vo Tri Thanh, head of the Department for International Economic Integration Policy under the Central Institute for Economic Management (CIEM), said the target for GDP growth rate of 8-8.5 percent is within reach. But many other economic experts said the annual GDP growth rate will be around 8.3 percent.
According to Doctor Nguyen Dinh Anh from the Financial Science Academy said if this year the target for GDP growth rate of 8.5 percent is not fulfilled it will be difficult to implement economic growth rates in the next three years.
Researcher Nguyen Trung said the annual GDP growth rate of 7-8 percent in the past years is one of the nation’s strengths. However, Vietnam should look at imbalanced issues during the development process, for example economic vision and strategy, development requirements and management capacity, infrastructure supply and demand, quality, quantity and supply and demand in human resources development.
In the past three years, it was not Vietnam (with an annual GDP growth rate of 8.13 percent), but Cambodia (with an annual GDP growth rate of 10.5 percent) trailing after “Giant” China. In Southern Asia, India ranks third with an annual GDP growth rate of 8.73 percent.
In 1986 – the first year of implementation of the Doi Moi (Renewal) process, Vietnam’s average per capita income was US$200 lower than China, US$997 lower than Thailand, US$1,950 lower than Malaysia and US$6,940 lower than the Republic of Korea. But the differences in 2006 were US$1,100, US$2,140, US$4,520 and US$17,000, respectively. These figures show big income gaps between Vietnam and these countries.
To obtain an economic growth rate of 8.5 percent, Mr Anh said Vietnam should consider growth related factors such as labour productivity and investment capital. In the past eight months, many industrial products achieved high growth, including air conditioners (70.2 percent), automobiles (65.5 percent), machine tools (60 percent), motorbikes (28.1 percent) and electric engines (26.3 percent). Exports in the first eight months of this year increased by 19 percent to nearly US$31.2 billion, but the real added values were not high as most products are manufactured under contract.
Imports seemed to reduce (Import in August decreased 0.4 percent compared to July) but imports in the eight months was still up by 30 percent compared to the same period last year. Many economists expect an increase in investment.
According to the Ministry of Finance, investment capital disbursement in the past eight months only reached around 40 percent of the yearly plan due to the low feasibility of big projects, for example a Dinh Vu DAP factory project. Dr Vo Chi Thanh said to ensure the economic growth rate, the Government and relevant ministries, departments and localities should pay more attention to the issue.
Many experts said factors affecting Vietnamese growth are mainly long-term development factors. In the past eight months, Vietnam attracted an additional US$8.3 billion foreign direct investment (FDI) capital. Thus, average FDI into Vietnam is more than US$1 billion a month, up nearly 40 percent compared to last year.
Mr Thanh said there are three main snags in long-term development: institutions, human resources and infrastructure. There is a lack of human resources, especially high-level human resources. The price of high-level human resources is higher than in Shanghai, China. Besides, infrastructure, such as roads and electricity is poor. These snags cannot be resolved in several months.
In addition to these three snags, Vietnam is likely to face an unstable macro economy and hunger in the central region. If these five issues are resolved, Vietnam will achieve a growth rate of 8.5 percent, creating a firm foundation for economic growth in next few years.
Source: VNE
Earlier August 2007, Doctor Vo Tri Thanh, head of the Department for International Economic Integration Policy under the Central Institute for Economic Management (CIEM), said the target for GDP growth rate of 8-8.5 percent is within reach. But many other economic experts said the annual GDP growth rate will be around 8.3 percent.
According to Doctor Nguyen Dinh Anh from the Financial Science Academy said if this year the target for GDP growth rate of 8.5 percent is not fulfilled it will be difficult to implement economic growth rates in the next three years.
Researcher Nguyen Trung said the annual GDP growth rate of 7-8 percent in the past years is one of the nation’s strengths. However, Vietnam should look at imbalanced issues during the development process, for example economic vision and strategy, development requirements and management capacity, infrastructure supply and demand, quality, quantity and supply and demand in human resources development.
In the past three years, it was not Vietnam (with an annual GDP growth rate of 8.13 percent), but Cambodia (with an annual GDP growth rate of 10.5 percent) trailing after “Giant” China. In Southern Asia, India ranks third with an annual GDP growth rate of 8.73 percent.
In 1986 – the first year of implementation of the Doi Moi (Renewal) process, Vietnam’s average per capita income was US$200 lower than China, US$997 lower than Thailand, US$1,950 lower than Malaysia and US$6,940 lower than the Republic of Korea. But the differences in 2006 were US$1,100, US$2,140, US$4,520 and US$17,000, respectively. These figures show big income gaps between Vietnam and these countries.
To obtain an economic growth rate of 8.5 percent, Mr Anh said Vietnam should consider growth related factors such as labour productivity and investment capital. In the past eight months, many industrial products achieved high growth, including air conditioners (70.2 percent), automobiles (65.5 percent), machine tools (60 percent), motorbikes (28.1 percent) and electric engines (26.3 percent). Exports in the first eight months of this year increased by 19 percent to nearly US$31.2 billion, but the real added values were not high as most products are manufactured under contract.
Imports seemed to reduce (Import in August decreased 0.4 percent compared to July) but imports in the eight months was still up by 30 percent compared to the same period last year. Many economists expect an increase in investment.
According to the Ministry of Finance, investment capital disbursement in the past eight months only reached around 40 percent of the yearly plan due to the low feasibility of big projects, for example a Dinh Vu DAP factory project. Dr Vo Chi Thanh said to ensure the economic growth rate, the Government and relevant ministries, departments and localities should pay more attention to the issue.
Many experts said factors affecting Vietnamese growth are mainly long-term development factors. In the past eight months, Vietnam attracted an additional US$8.3 billion foreign direct investment (FDI) capital. Thus, average FDI into Vietnam is more than US$1 billion a month, up nearly 40 percent compared to last year.
Mr Thanh said there are three main snags in long-term development: institutions, human resources and infrastructure. There is a lack of human resources, especially high-level human resources. The price of high-level human resources is higher than in Shanghai, China. Besides, infrastructure, such as roads and electricity is poor. These snags cannot be resolved in several months.
In addition to these three snags, Vietnam is likely to face an unstable macro economy and hunger in the central region. If these five issues are resolved, Vietnam will achieve a growth rate of 8.5 percent, creating a firm foundation for economic growth in next few years.
Source: VNE
Friday, August 31, 2007
Supply side shocks, liquidity drive inflation
Headline inflation picked up in August from 6.6 per cent at the end-2006 to 8.6 per cent year-on-year. This represents an inflation of 7.4 per cent in the first eight months of the year, somewhat below the real GDP growth of 7.8 per cent during the first half of the year.
Rising inflation was initially induced by a rapid increase in food prices, for example in staple crops, and then later in other goods, especially pork.
Non-food prices inched up only marginally during the same period from 5 per cent to 5.2 per cent year-on-year. While broadly stable, non-food price inflation is by no means low.
Categories with rapid price increases include housing and construction materials, and other goods and services, mainly personal consumption items. Except for transportation and education, most other prices are hovering between 5 and 8 per cent.
Adjusting for seasonal variations, the recent price acceleration can be seen clearly as a supply side shock. Non-food prices have been broadly stable at below 6 per cent since the third quarter of 2006, while food prices started to increase sharply from the early part of this year.
Food price inflation in Viet Nam reflects a region-wide development with China and Indonesia, in particular, experiencing a similar upswing. However, because of lower non-food inflation in these countries, Viet Nam’s headline inflation is one of the highest in the region.
Underlying factors
There are several underlying factors that could explain the recent pick up in inflation.
First, shortages of food arising from weather related calamities, compounded by foot-and-mouth and, most recently, blue-ear disease, have driven food prices higher, such as rice and pork, along with several vegetables and cooking oil.
Second, international commodity prices rose sharply in 2007, peaking in mid-year, and filtered through to the local market. For example, from the second quarter of 2006 to mid-2007, international cereal prices rose by 21 per cent, vegetable oil by 5 per cent, meat by 9 per cent, and metals by as much as 80 per cent.
Third, aggregate demand has remained strong during the first half of 2007, not only driving non-food inflation but also merchandise imports. The increase in imports helped to release some of the pressures from domestic demand. However, higher international prices also implied a sharp increase in the unit value of imports.
Fourth, the higher inflation in Viet Nam could partly be a relative price adjustment process, although a lack of quantitative evidence makes it difficult to affirm.
Policy and responses
The regular seasonal slowdown of economic activity in the first half of 2007 was less visible as strong domestic demand and exports helped sustain a high rate of GDP growth.
Non-oil exports recorded an overall growth of 28 per cent during the first eight months in US dollar terms, while strong domestic demand in response to large capital inflows and rising household incomes through the asset boom led to a pick up in consumer demand. Furthermore, investment remained robust in part due to increasing foreign direct investment (FDI) and construction.
Domestic sales data shows an increase of 23 per cent during the first eight months of the year, and construction sector rising by 10.5 per cent in the second quarter.
Moreover, non-oil import merchandise grew by 34 per cent during the same period, reflecting not only imports of capital and intermediate goods but also final consumer products such as cars and electronics.
As such, relatively low agricultural production compared with previous years was more than compensated by the strong growth in manufacturing, construction, and services.
Macroeconomic policies were broadly accommodative of these developments. The liquidity injection arising from foreign exchange market intervention was only partly sterilised, facilitating rapid private sector credit growth. Furthermore, credit expansion had a more direct impact on consumption than indirectly through the real balance effect by fuelling an asset boom and also through direct consumer loans.
Adding to this liquidity injection are private capital inflows, which in the case of dollarised economies, can add directly to domestic liquidity.
There was no added fiscal stimulus in the first half of the year as spending was contained.
However, the non-oil fiscal balance still remains well above 10 per cent of GDP. In other words, this amount represents a net fiscal injection of money into the economy that is not raised from local sources.
Short-term outlook
Inflation outlook is subject to various conditions. On the supply side, food inflation could pick up in the fourth quarter, repeating last year’s pattern, but is subject to weather conditions. Also, pork supply has not yet been brought under control, and will be an important factor in determining food inflation in the second half.
Overall inflation, however, will be influenced by macroeconomic policies. Policies implemented to date argue for some optimism.
Various measures introduced by the Government - for example State Bank of Viet Nam (SBV) Decision 03/2007 and Directive 03, and raising commercial banks’ required reserves by 100 per cent in June - helped absorb liquidity.
The longer maturity and larger quantity of SBV bills issued in recent months also helped to tighten the interbank market condition.
Assuming that the SBV will continue to do so in an environment where inflows have moderated due to the recent global financial turmoil related to the US sub-prime mortgage market, the rate of acceleration of monetary aggregates could be contained in the second half of the year.
Nevertheless, the recent cooling on the stock market by itself cannot assure containment of the asset boom as there is still ample liquidity that will search for other assets such as property.
On the fiscal policy side, the deferment of minimum wage increases by the Government and the containment of capital spending in the second half of the year will ensure that no added fiscal stimulus is provided to the economy.
Finally, the current moderation of inflows provides an opportunity for the Government to supplement the positive effect of the temporary reduction of tariff rates by intervening less rigorously in the foreign exchange market.
Higher inflation is a concern as it affects the poor more than the rich, especially if inflation is induced by an asset boom. Moreover, what matters is not whether inflation has exceeded GDP growth, but whether uncertainties created by high inflation is starting to have an adverse impact on economic growth itself.
Source: VNS
Rising inflation was initially induced by a rapid increase in food prices, for example in staple crops, and then later in other goods, especially pork.
Non-food prices inched up only marginally during the same period from 5 per cent to 5.2 per cent year-on-year. While broadly stable, non-food price inflation is by no means low.
Categories with rapid price increases include housing and construction materials, and other goods and services, mainly personal consumption items. Except for transportation and education, most other prices are hovering between 5 and 8 per cent.
Adjusting for seasonal variations, the recent price acceleration can be seen clearly as a supply side shock. Non-food prices have been broadly stable at below 6 per cent since the third quarter of 2006, while food prices started to increase sharply from the early part of this year.
Food price inflation in Viet Nam reflects a region-wide development with China and Indonesia, in particular, experiencing a similar upswing. However, because of lower non-food inflation in these countries, Viet Nam’s headline inflation is one of the highest in the region.
Underlying factors
There are several underlying factors that could explain the recent pick up in inflation.
First, shortages of food arising from weather related calamities, compounded by foot-and-mouth and, most recently, blue-ear disease, have driven food prices higher, such as rice and pork, along with several vegetables and cooking oil.
Second, international commodity prices rose sharply in 2007, peaking in mid-year, and filtered through to the local market. For example, from the second quarter of 2006 to mid-2007, international cereal prices rose by 21 per cent, vegetable oil by 5 per cent, meat by 9 per cent, and metals by as much as 80 per cent.
Third, aggregate demand has remained strong during the first half of 2007, not only driving non-food inflation but also merchandise imports. The increase in imports helped to release some of the pressures from domestic demand. However, higher international prices also implied a sharp increase in the unit value of imports.
Fourth, the higher inflation in Viet Nam could partly be a relative price adjustment process, although a lack of quantitative evidence makes it difficult to affirm.
Policy and responses
The regular seasonal slowdown of economic activity in the first half of 2007 was less visible as strong domestic demand and exports helped sustain a high rate of GDP growth.
Non-oil exports recorded an overall growth of 28 per cent during the first eight months in US dollar terms, while strong domestic demand in response to large capital inflows and rising household incomes through the asset boom led to a pick up in consumer demand. Furthermore, investment remained robust in part due to increasing foreign direct investment (FDI) and construction.
Domestic sales data shows an increase of 23 per cent during the first eight months of the year, and construction sector rising by 10.5 per cent in the second quarter.
Moreover, non-oil import merchandise grew by 34 per cent during the same period, reflecting not only imports of capital and intermediate goods but also final consumer products such as cars and electronics.
As such, relatively low agricultural production compared with previous years was more than compensated by the strong growth in manufacturing, construction, and services.
Macroeconomic policies were broadly accommodative of these developments. The liquidity injection arising from foreign exchange market intervention was only partly sterilised, facilitating rapid private sector credit growth. Furthermore, credit expansion had a more direct impact on consumption than indirectly through the real balance effect by fuelling an asset boom and also through direct consumer loans.
Adding to this liquidity injection are private capital inflows, which in the case of dollarised economies, can add directly to domestic liquidity.
There was no added fiscal stimulus in the first half of the year as spending was contained.
However, the non-oil fiscal balance still remains well above 10 per cent of GDP. In other words, this amount represents a net fiscal injection of money into the economy that is not raised from local sources.
Short-term outlook
Inflation outlook is subject to various conditions. On the supply side, food inflation could pick up in the fourth quarter, repeating last year’s pattern, but is subject to weather conditions. Also, pork supply has not yet been brought under control, and will be an important factor in determining food inflation in the second half.
Overall inflation, however, will be influenced by macroeconomic policies. Policies implemented to date argue for some optimism.
Various measures introduced by the Government - for example State Bank of Viet Nam (SBV) Decision 03/2007 and Directive 03, and raising commercial banks’ required reserves by 100 per cent in June - helped absorb liquidity.
The longer maturity and larger quantity of SBV bills issued in recent months also helped to tighten the interbank market condition.
Assuming that the SBV will continue to do so in an environment where inflows have moderated due to the recent global financial turmoil related to the US sub-prime mortgage market, the rate of acceleration of monetary aggregates could be contained in the second half of the year.
Nevertheless, the recent cooling on the stock market by itself cannot assure containment of the asset boom as there is still ample liquidity that will search for other assets such as property.
On the fiscal policy side, the deferment of minimum wage increases by the Government and the containment of capital spending in the second half of the year will ensure that no added fiscal stimulus is provided to the economy.
Finally, the current moderation of inflows provides an opportunity for the Government to supplement the positive effect of the temporary reduction of tariff rates by intervening less rigorously in the foreign exchange market.
Higher inflation is a concern as it affects the poor more than the rich, especially if inflation is induced by an asset boom. Moreover, what matters is not whether inflation has exceeded GDP growth, but whether uncertainties created by high inflation is starting to have an adverse impact on economic growth itself.
Source: VNS
Tuesday, August 28, 2007
Jan-Aug industrial output to rise 17 pct y/y
Vietnam's January-to-August industrial output is expected to rise 17.1 percent from a year earlier to 377.07 trillion dong ($23.3 billion), but crude oil production has slowed, the government said on Tuesday.
The industrial sector, making up a third of Vietnam's economy, helped lift gross domestic product by 7.87 percent in the first half of the year from the same period a year earlier.
But crude oil production during the first eight months is expected to fall 8 percent from the same period last year to 10.38 million tonnes, or 313,100 barrels per day, the government's General Statistics Office said in a monthly report.
Crude's decline "does not only affect greatly the export growth and state budget income but also has an impact on the industrial sector's contribution to the eight-month gross domestic product growth", it said, without giving details.
Crude exports, Vietnam's top foreign exchange earner, in January-to-August fell 11.8 percent from a year earlier to $5.1 billion, the statistics office said.
However, production of cars, machinery and air-conditioners in the eight-month period extended the strong growth since the start of the year, rising by between 60 percent and 70.2 percent from a year earlier.
The state sector was estimated to grow 10.2 percent during the first eight months, up from 9.7 percent in the January-to-July period.
Production by enterprises outside state control was also expected to expand slightly faster in the January-to-August period, growing 20.5 percent from a year earlier, up 0.1 percentage point compared with January-to-July.
Growth in the foreign investment sector slowed to 18.6 percent, from 18.9 percent during the first seven months.
Industry accounts for 34.9 percent of gross domestic product, ranking after the service sector which contributed 38.8 percent to Vietnam's GDP during the first half, the government said.
Vietnam aims for GDP growth of 9 percent in the second half of this year, which will help it meet its annual growth target of 8.5 percent.
Source: Reuters
The industrial sector, making up a third of Vietnam's economy, helped lift gross domestic product by 7.87 percent in the first half of the year from the same period a year earlier.
But crude oil production during the first eight months is expected to fall 8 percent from the same period last year to 10.38 million tonnes, or 313,100 barrels per day, the government's General Statistics Office said in a monthly report.
Crude's decline "does not only affect greatly the export growth and state budget income but also has an impact on the industrial sector's contribution to the eight-month gross domestic product growth", it said, without giving details.
Crude exports, Vietnam's top foreign exchange earner, in January-to-August fell 11.8 percent from a year earlier to $5.1 billion, the statistics office said.
However, production of cars, machinery and air-conditioners in the eight-month period extended the strong growth since the start of the year, rising by between 60 percent and 70.2 percent from a year earlier.
The state sector was estimated to grow 10.2 percent during the first eight months, up from 9.7 percent in the January-to-July period.
Production by enterprises outside state control was also expected to expand slightly faster in the January-to-August period, growing 20.5 percent from a year earlier, up 0.1 percentage point compared with January-to-July.
Growth in the foreign investment sector slowed to 18.6 percent, from 18.9 percent during the first seven months.
Industry accounts for 34.9 percent of gross domestic product, ranking after the service sector which contributed 38.8 percent to Vietnam's GDP during the first half, the government said.
Vietnam aims for GDP growth of 9 percent in the second half of this year, which will help it meet its annual growth target of 8.5 percent.
Source: Reuters
Price increases stopped by drastic measures
he prices of food, poultry meat, seafood and dairy products have been stabilised, while the prices of steel, import cars and electric products have been decreasing in some areas.
Regarding food prices, though rice exporters are trying to collect rice to fulfill signed export contracts, the rice price has still decreased by VND50-100/kg thanks to the superfluous supply, now selling at VND4,600-5,200/kg.
However, as the Ministry of Industry and Trade has forecast, as the northern region has entered the rainy and storm season, while floods threaten the south, the food price is expected to increase slightly in some areas.
Meanwhile, foodstuff prices are tending to slightly decrease thanks to superfluous supply. The price of pork, for example, saw a slight decrease in August after increasing sharply in July, now selling at VND19-23,000/kg in the north, and VND19-25,000/kg in the south.
The prices of beef, poultry meat, and seafood, seeing increases of VND2-4,000/kg in early August, have slightly decreased. Beef is selling at VND75-90,000/kg. Chicken bred in industrial farms is selling at VND35,000/kg, while chicken bred at households is selling at VND58-60,000/kg. In the Mekong River Delta, tra fish price reduced by VND500-600/kg, now selling at VND13,400/kg on average.
At the end of July and in early August, imported dairy products saw sharp price increases of VND20-96,000/unit. The decision to cut taxes on dairy products has helped prevent further increases, but has not helped reduce selling prices.
Nguyen Tien Thoa, Head of the Price Control Department under the Ministry of Finance, said that the 3-week inspection tours of steel mills, gas and dairy producers, the products that saw biggest price increases over the last time, was nearly finished, and the results would be announced in some days.
Regarding construction material prices, the Ministry of Industry and Trade (MIT) said that the prices would be stable until the end of the year thanks to big stocks.
Some 3mil tonnes of cement were consumed in August despite the rainy season, raising the total consumption level of cement to 23.3mil tonnes. The price is hovering between VND760-800,000/tonne in the north, and VND878-900,000 in the south. The volume of cement in stock is 2.21mil tonnes, which, together with local production, will ensure adequate supply for the market, and no price fever is expected to occur.
As for construction steel, Vietnamese steel producers now tend to purchase ingot steel from Malaysia and Thailand due to the limited supply from China. The steel price is VND9,550-9,900/kg now, down by VND300/kg over the previous month.
Also according to MIT, after the decision to reduce petrol price by VND500/litre, petrol distributors still can make profit of 9.6% of CIF price, while they are incurring heavy losses with diesel (VND1,488/litre) and kerosene (VND1,376/litre).
MIT has predicted the CPI growth rate of 0.2-0.3% for September, saying that the high purchasing power on the National Day holiday, the opening of the new academic year and Mid-Autumn festival will be the factors that can push up prices.
Also in an effort to curb the price increases, the central bank has announced it will continuously use the open market operations to withdraw cash from circulation. Since mid August 2007, the central bank has offered to sell bonds on all working days. Besides the 1-month, 2-month, 3-month, 6-month, 9-month and 12-month term, the central bank has offered 4-month and 5-month term bonds as well.
Source: VNE
Regarding food prices, though rice exporters are trying to collect rice to fulfill signed export contracts, the rice price has still decreased by VND50-100/kg thanks to the superfluous supply, now selling at VND4,600-5,200/kg.
However, as the Ministry of Industry and Trade has forecast, as the northern region has entered the rainy and storm season, while floods threaten the south, the food price is expected to increase slightly in some areas.
Meanwhile, foodstuff prices are tending to slightly decrease thanks to superfluous supply. The price of pork, for example, saw a slight decrease in August after increasing sharply in July, now selling at VND19-23,000/kg in the north, and VND19-25,000/kg in the south.
The prices of beef, poultry meat, and seafood, seeing increases of VND2-4,000/kg in early August, have slightly decreased. Beef is selling at VND75-90,000/kg. Chicken bred in industrial farms is selling at VND35,000/kg, while chicken bred at households is selling at VND58-60,000/kg. In the Mekong River Delta, tra fish price reduced by VND500-600/kg, now selling at VND13,400/kg on average.
At the end of July and in early August, imported dairy products saw sharp price increases of VND20-96,000/unit. The decision to cut taxes on dairy products has helped prevent further increases, but has not helped reduce selling prices.
Nguyen Tien Thoa, Head of the Price Control Department under the Ministry of Finance, said that the 3-week inspection tours of steel mills, gas and dairy producers, the products that saw biggest price increases over the last time, was nearly finished, and the results would be announced in some days.
Regarding construction material prices, the Ministry of Industry and Trade (MIT) said that the prices would be stable until the end of the year thanks to big stocks.
Some 3mil tonnes of cement were consumed in August despite the rainy season, raising the total consumption level of cement to 23.3mil tonnes. The price is hovering between VND760-800,000/tonne in the north, and VND878-900,000 in the south. The volume of cement in stock is 2.21mil tonnes, which, together with local production, will ensure adequate supply for the market, and no price fever is expected to occur.
As for construction steel, Vietnamese steel producers now tend to purchase ingot steel from Malaysia and Thailand due to the limited supply from China. The steel price is VND9,550-9,900/kg now, down by VND300/kg over the previous month.
Also according to MIT, after the decision to reduce petrol price by VND500/litre, petrol distributors still can make profit of 9.6% of CIF price, while they are incurring heavy losses with diesel (VND1,488/litre) and kerosene (VND1,376/litre).
MIT has predicted the CPI growth rate of 0.2-0.3% for September, saying that the high purchasing power on the National Day holiday, the opening of the new academic year and Mid-Autumn festival will be the factors that can push up prices.
Also in an effort to curb the price increases, the central bank has announced it will continuously use the open market operations to withdraw cash from circulation. Since mid August 2007, the central bank has offered to sell bonds on all working days. Besides the 1-month, 2-month, 3-month, 6-month, 9-month and 12-month term, the central bank has offered 4-month and 5-month term bonds as well.
Source: VNE
Price increases – reverse effects of WTO admission
he price increases in the last eight months, according to economist Pham Chi Lan, have been explained as reverse effects of Vietnam’s admission to the WTO due to shortcomings in the management of the national economy.
The consumer price index (CPI) has increased by 6.78% through August, and 8.57% over the same period last year. The most worrying thing is that rural areas have exceeded urban areas in terms of CPI growth rate: in August, the CPI increase in rural areas was higher than that in urban areas, 0.6% vs. 0.5%. The continued price increases have negatively impacted peoples’ lives.
The price increases seem to come contrary to peoples’ expectations that prices would decrease as a result of WTO membership.
However, as Economist Pham Chi Lan, a former member of the Prime Minister’s Research Team, has pointed out, the price increases were expected. This is called one of the ‘prompt reverse effects’ occurring right after Vietnam has joined the WTO and signals the process of more deep integration into the world’s economy.
Mrs Lan said that WTO membership had brought both active and inactive effects. The active ones include the increasing investment flow into Vietnam, while the inactive ones include the price increases.
According to Mrs Lan, since becoming an official member of the WTO, the vulnerability of the national economy has become clearer. The links connecting Vietnam and the world’s market have become closer, i.e. the world’s market fluctuations have more direct impacts on Vietnam. Vietnam, for example, has been influenced by the oil price increases. It proves to be quite different from 1997, when the financial and monetary crisis occurred. At that time, the outside happenings did not have negative impacts on Vietnam.
As Vietnam has opened its market, the national economy has shown some shortcomings. As Vietnam’s management skills are not good, it finds it hard to control the market and prices.
Moreover, Vietnam still lacks necessary factors to run a market in which prices are defined purely by the supply and demand basis. Let’s take petrol price as an example. Enterprises did not lower the selling prices of petrol even when the world’s prices went down and the government asked them to lower prices. Mrs Lan said that in this case, it was because Vietnam did not have necessary market forces which could create healthy competition. Vietnam has 11 petrol distributors, including nine state owned, and Petrolimex alone holds up to 60% of the market share.
Mrs Lan said that in the short term, Vietnam would have to bear reverse effects of WTO membership, and the undesired effects would gradually disappear when Vietnam improved its management capability.
Source: VNE
The consumer price index (CPI) has increased by 6.78% through August, and 8.57% over the same period last year. The most worrying thing is that rural areas have exceeded urban areas in terms of CPI growth rate: in August, the CPI increase in rural areas was higher than that in urban areas, 0.6% vs. 0.5%. The continued price increases have negatively impacted peoples’ lives.
The price increases seem to come contrary to peoples’ expectations that prices would decrease as a result of WTO membership.
However, as Economist Pham Chi Lan, a former member of the Prime Minister’s Research Team, has pointed out, the price increases were expected. This is called one of the ‘prompt reverse effects’ occurring right after Vietnam has joined the WTO and signals the process of more deep integration into the world’s economy.
Mrs Lan said that WTO membership had brought both active and inactive effects. The active ones include the increasing investment flow into Vietnam, while the inactive ones include the price increases.
According to Mrs Lan, since becoming an official member of the WTO, the vulnerability of the national economy has become clearer. The links connecting Vietnam and the world’s market have become closer, i.e. the world’s market fluctuations have more direct impacts on Vietnam. Vietnam, for example, has been influenced by the oil price increases. It proves to be quite different from 1997, when the financial and monetary crisis occurred. At that time, the outside happenings did not have negative impacts on Vietnam.
As Vietnam has opened its market, the national economy has shown some shortcomings. As Vietnam’s management skills are not good, it finds it hard to control the market and prices.
Moreover, Vietnam still lacks necessary factors to run a market in which prices are defined purely by the supply and demand basis. Let’s take petrol price as an example. Enterprises did not lower the selling prices of petrol even when the world’s prices went down and the government asked them to lower prices. Mrs Lan said that in this case, it was because Vietnam did not have necessary market forces which could create healthy competition. Vietnam has 11 petrol distributors, including nine state owned, and Petrolimex alone holds up to 60% of the market share.
Mrs Lan said that in the short term, Vietnam would have to bear reverse effects of WTO membership, and the undesired effects would gradually disappear when Vietnam improved its management capability.
Source: VNE
Tuesday, August 14, 2007
Vietnam doubles forex reserves, fights inflation
Vietnam has enough foreign exchange reserves to cover 20 weeks of imports, a senior central bank official was quoted on Tuesday as saying.
"We have dozens of billions of U.S. dollar in reserves," the Thanh Nien newspaper quoted Deputy Governor of the State Bank of Vietnam Nguyen Dong Tien as saying.
"While the foreign exchange reserves were just enough to cover nine to 10 weeks of imports, now they are enough for 20 weeks," Tien told a news conference on Monday to which foreign reporters were not invited.
He did not give the absolute value of reserves but said the increase resulted from rising foreign investment inflows and central bank purchases of foreign exchange to hold down the dong.
Economists say the central bank has bought $7 billion this year, meaning some 110 trillion dong has been pumped into the economy, which has fuelled inflation.
Consumer prices in July were 8.39 percent higher than the same month last year and by the end of July the consumer price index had risen 6.19 percent from the end of 2006.
The government is aiming for annual GDP growth of 8.5 percent this year while keeping inflation below that growth rate.
Economists say double-digit inflation is a possibility, but Tien told the news conference that the central bank had stepped up its draining of inflation-fuelling funds from the economy through open market transactions.
So far it had mopped up 80 percent of the dong spent to purchase the foreign currency, Tien said.
"The prime minister has a belief that it will be feasible to achieve both high economic growth and control of inflation," Tien was quoted by Thanh Nien as saying.
"I personally also believe so and I am ready to bet with anyone who says this year's inflation is double-digit," he said.
To back up the fight against inflation, the Finance Ministry cut the import duty on several diary products, meat, home appliances and cars last week.
The Finance Ministry and the Ministry of Industry and Trade are also asking domestic petrol distributors to cut petrol prices by 500 dong per litre, the government said. That is a cut of around 4 percent.
The government has instructed the Agriculture Ministry to try to contain pig disease now spreading in the central and southern provinces, which is pushing up meat prices.
Food accounts for more than 40 percent of the basket used to calculate Vietnam's consumer price index.
Source: Reuters
"We have dozens of billions of U.S. dollar in reserves," the Thanh Nien newspaper quoted Deputy Governor of the State Bank of Vietnam Nguyen Dong Tien as saying.
"While the foreign exchange reserves were just enough to cover nine to 10 weeks of imports, now they are enough for 20 weeks," Tien told a news conference on Monday to which foreign reporters were not invited.
He did not give the absolute value of reserves but said the increase resulted from rising foreign investment inflows and central bank purchases of foreign exchange to hold down the dong.
Economists say the central bank has bought $7 billion this year, meaning some 110 trillion dong has been pumped into the economy, which has fuelled inflation.
Consumer prices in July were 8.39 percent higher than the same month last year and by the end of July the consumer price index had risen 6.19 percent from the end of 2006.
The government is aiming for annual GDP growth of 8.5 percent this year while keeping inflation below that growth rate.
Economists say double-digit inflation is a possibility, but Tien told the news conference that the central bank had stepped up its draining of inflation-fuelling funds from the economy through open market transactions.
So far it had mopped up 80 percent of the dong spent to purchase the foreign currency, Tien said.
"The prime minister has a belief that it will be feasible to achieve both high economic growth and control of inflation," Tien was quoted by Thanh Nien as saying.
"I personally also believe so and I am ready to bet with anyone who says this year's inflation is double-digit," he said.
To back up the fight against inflation, the Finance Ministry cut the import duty on several diary products, meat, home appliances and cars last week.
The Finance Ministry and the Ministry of Industry and Trade are also asking domestic petrol distributors to cut petrol prices by 500 dong per litre, the government said. That is a cut of around 4 percent.
The government has instructed the Agriculture Ministry to try to contain pig disease now spreading in the central and southern provinces, which is pushing up meat prices.
Food accounts for more than 40 percent of the basket used to calculate Vietnam's consumer price index.
Source: Reuters
Two-digit inflation rate won’t occur
The government will instruct ministries to take necessary action to curb inflation; two-digit inflation rate will not occur, government officials said yesterday at a press conference to announce the Prime Minister’s conclusions about measures to curb the price increases.
When asked if the government would ask the National Assembly to adjust the approved plan for CPI growth rate as the prices increased sharply in the last time, Tran Quoc Toan, Deputy Chairman of the Government’s Office said that the government was determined to curb inflation, and the approved plan for CPI growth rate would still be followed.
Nguyen Xuan Phuc, Chairman of the Government’s Office, stressed that the economic potential Vietnam had now (foreign currency reserves, food and materials) was strong enough to prevent overly high price increases. Moreover, as a result of the policy on encouraging investment, the GDP growth rate would be higher than CPI in 2007.
“The scenario for two-digit inflation rate will never occur,” Mr Phuc said, denying the opinions by some experts that the inflation rate in 2007 would reach 10% or 11%.
Meanwhile, Nguyen Dong Tien, Deputy Governor of the State Bank of Vietnam, said that he did not believe those who said that the inflation rate would be two digits. “I would bet money that the inflation rate will not reach the two-digit level. I have confidence in the measures the ministries are taking to curb the price increases,” Mr Tien said.
At the press conference, the State Bank of Vietnam officially announced monetary policy solutions aiming to settle the monetary problems which people think were the main reason behind the high inflation rate in the first seven months of the year.
According to Mr Tien, in the first half of 2007, the balance of payments saw the surplus of $6bil, which has helped double the national foreign currency reserves in the last seven months compared to the end of 2006. Vietnam now has the foreign currency reserves equivalent to the payment for seven weeks of imports, the figure which was previously set for 2010.
“We are facing a problem, which has never been seen in history: the foreign investment capital flows in big quantity. We have sometimes bought $500-600mil a day, while we bought $4bil only in a whole year of 2006,” Mr Tien said, adding that this had put big pressure on the economy and needed suitable solutions.
The central bank had to spend VND to buy foreign currencies, and then issue bonds to withdraw VND from circulation. It is estimated that 82% of the cash spent on buying foreign currencies has been taken back by the bond issuances. Moreover, the decision on requiring higher compulsory reserve ratio on bank deposits has helped withdraw VND30tril from circulation, thus reducing the total payment instruments and curbing the price increases.
On August 13, the Ministry of Finance also announced it would issue VND18tril worth of bonds in the third quarter of the year. The bond issuance in July helped raise VND5tril, and it is expected that another VND13tril will be raised in August and September to withdraw cash from circulation.
Deputy Minister of Finance Tran Xuan Ha said at the press conference that his ministry would consider lowering taxes further by 50-70% on goods items which had the tax rates of 20-50% in order to ensure stable supplies, thus stabilising the market.
The goods items which may see further tax decreases include fish, materials to make food (cereal, wheat flour, canned food, sausage, fruit juice) and products belonging to the construction material group, like construction glass.
Mr Ha said that the government would keep strict control over rice exports in order to ensure food security. Vietnam has exported 2.8mil tonnes of rice so far this year, and if counting the signed contracts, the exports have reached 4.5mil tonnes, equal to the volume the government set for the whole of 2007. No more contracts will be allowed to be signed until the fourth quarter of the year.
On the decision to lower taxes on 18 categories of products effective as of August 8, Mr Ha said that if the imports could be kept at the level in the first months of the year, the state budget would lose VND1tril in the last five months of the year. However, it is necessary to sacrifice the state budget collection for the supply and demand balance of goods.
The Ministry of Trade and Industry has forecast that the drastic measures taken by ministries and branches will help curb the inflation rate at 0.5% in August 2007.
Source: VNE
When asked if the government would ask the National Assembly to adjust the approved plan for CPI growth rate as the prices increased sharply in the last time, Tran Quoc Toan, Deputy Chairman of the Government’s Office said that the government was determined to curb inflation, and the approved plan for CPI growth rate would still be followed.
Nguyen Xuan Phuc, Chairman of the Government’s Office, stressed that the economic potential Vietnam had now (foreign currency reserves, food and materials) was strong enough to prevent overly high price increases. Moreover, as a result of the policy on encouraging investment, the GDP growth rate would be higher than CPI in 2007.
“The scenario for two-digit inflation rate will never occur,” Mr Phuc said, denying the opinions by some experts that the inflation rate in 2007 would reach 10% or 11%.
Meanwhile, Nguyen Dong Tien, Deputy Governor of the State Bank of Vietnam, said that he did not believe those who said that the inflation rate would be two digits. “I would bet money that the inflation rate will not reach the two-digit level. I have confidence in the measures the ministries are taking to curb the price increases,” Mr Tien said.
At the press conference, the State Bank of Vietnam officially announced monetary policy solutions aiming to settle the monetary problems which people think were the main reason behind the high inflation rate in the first seven months of the year.
According to Mr Tien, in the first half of 2007, the balance of payments saw the surplus of $6bil, which has helped double the national foreign currency reserves in the last seven months compared to the end of 2006. Vietnam now has the foreign currency reserves equivalent to the payment for seven weeks of imports, the figure which was previously set for 2010.
“We are facing a problem, which has never been seen in history: the foreign investment capital flows in big quantity. We have sometimes bought $500-600mil a day, while we bought $4bil only in a whole year of 2006,” Mr Tien said, adding that this had put big pressure on the economy and needed suitable solutions.
The central bank had to spend VND to buy foreign currencies, and then issue bonds to withdraw VND from circulation. It is estimated that 82% of the cash spent on buying foreign currencies has been taken back by the bond issuances. Moreover, the decision on requiring higher compulsory reserve ratio on bank deposits has helped withdraw VND30tril from circulation, thus reducing the total payment instruments and curbing the price increases.
On August 13, the Ministry of Finance also announced it would issue VND18tril worth of bonds in the third quarter of the year. The bond issuance in July helped raise VND5tril, and it is expected that another VND13tril will be raised in August and September to withdraw cash from circulation.
Deputy Minister of Finance Tran Xuan Ha said at the press conference that his ministry would consider lowering taxes further by 50-70% on goods items which had the tax rates of 20-50% in order to ensure stable supplies, thus stabilising the market.
The goods items which may see further tax decreases include fish, materials to make food (cereal, wheat flour, canned food, sausage, fruit juice) and products belonging to the construction material group, like construction glass.
Mr Ha said that the government would keep strict control over rice exports in order to ensure food security. Vietnam has exported 2.8mil tonnes of rice so far this year, and if counting the signed contracts, the exports have reached 4.5mil tonnes, equal to the volume the government set for the whole of 2007. No more contracts will be allowed to be signed until the fourth quarter of the year.
On the decision to lower taxes on 18 categories of products effective as of August 8, Mr Ha said that if the imports could be kept at the level in the first months of the year, the state budget would lose VND1tril in the last five months of the year. However, it is necessary to sacrifice the state budget collection for the supply and demand balance of goods.
The Ministry of Trade and Industry has forecast that the drastic measures taken by ministries and branches will help curb the inflation rate at 0.5% in August 2007.
Source: VNE
Monday, August 13, 2007
VAFI considering setting up club of minority shareholders
The idea of setting up a club of minority shareholders, which has been suggested by Head of the Division for Macroeconomic Studies Research under the Central Institute of Economic Management (CIEM) Nguyen Dinh Cung, is being considered by the Vietnam Association of Financial Investors (VAFI).
Mr Cung said that in Vietnam there existed legal loopholes which could cause small shareholders, called ‘minority shareholders’, losses. He said that while waiting for the legal framework to be perfected, minority shareholders should stand in an organisation, a club for minority shareholders, so as to be able to protect themselves better.
Regarding the legal loopholes, Mr Cung said that the Enterprise Law and Securities Law both mentioned provisions for the protection of minority shareholders. However, the provisions are still far from reaching the highest standards in international practice.
For example, current laws require listing companies to expose regular information, irregular information as stipulated in Circular No 38 issued by the Ministry of Finance. However, information relating to the assessment about the future of listing companies is not required by the laws, while the information is very important.
For example, investors should know the assessment by listing companies’ management boards on the changes of the markets, the impacts of the capital market, and so on. They also deserve to know how many percent of stakes the management board holds in one company or another and the ability of the members of the management board.
Mr Cung said that only when investors were provided with the information they needed, especially information about possible changes with the listing companies, could they make suitable investment decisions ensuring healthy and transparent transactions.
He said that minority shareholders should gather to propose amendments to the legal documents that could help protect their benefit. For example, the current laws do not prohibit members of management boards from transferring shares. And in order to limit transfers, minority shareholders should ask for the stipulation that a transfer would only be allowed if the deal was accepted by the management board to ensure that it did not cause a supply-demand imbalance and losses for them.
For the time being, minority shareholders should gather in one club, in which they can exchange information and protect each others’ benefits.
Mr Cung has admitted that it is difficult to gather shareholders in one club. In fact, several groups of investors have been thinking of such clubs, but these are just small-scale clubs. “Such a club should be organised on a bigger scale, and there should be supporters, and a pioneer who leads the club,” he said.
Source: VNE
Mr Cung said that in Vietnam there existed legal loopholes which could cause small shareholders, called ‘minority shareholders’, losses. He said that while waiting for the legal framework to be perfected, minority shareholders should stand in an organisation, a club for minority shareholders, so as to be able to protect themselves better.
Regarding the legal loopholes, Mr Cung said that the Enterprise Law and Securities Law both mentioned provisions for the protection of minority shareholders. However, the provisions are still far from reaching the highest standards in international practice.
For example, current laws require listing companies to expose regular information, irregular information as stipulated in Circular No 38 issued by the Ministry of Finance. However, information relating to the assessment about the future of listing companies is not required by the laws, while the information is very important.
For example, investors should know the assessment by listing companies’ management boards on the changes of the markets, the impacts of the capital market, and so on. They also deserve to know how many percent of stakes the management board holds in one company or another and the ability of the members of the management board.
Mr Cung said that only when investors were provided with the information they needed, especially information about possible changes with the listing companies, could they make suitable investment decisions ensuring healthy and transparent transactions.
He said that minority shareholders should gather to propose amendments to the legal documents that could help protect their benefit. For example, the current laws do not prohibit members of management boards from transferring shares. And in order to limit transfers, minority shareholders should ask for the stipulation that a transfer would only be allowed if the deal was accepted by the management board to ensure that it did not cause a supply-demand imbalance and losses for them.
For the time being, minority shareholders should gather in one club, in which they can exchange information and protect each others’ benefits.
Mr Cung has admitted that it is difficult to gather shareholders in one club. In fact, several groups of investors have been thinking of such clubs, but these are just small-scale clubs. “Such a club should be organised on a bigger scale, and there should be supporters, and a pioneer who leads the club,” he said.
Source: VNE
Nearly US$40 billion to enter Vietnam
According to the Foreign Investment Agency, there are 48 projects totalling US$39.8 billion waiting to come to Vietnam.
A large part of this huge source of capital will be poured into hi-tech, thermo-power, real estate and steel projects. Specifically, Taiwan’s Foxconn Group will invest $5 billion to build electronic technology parks in several provinces in Vietnam. Pacific Land Limited from Britain plans to invest $1 billion into the Sai Dong A Hi-tech Park in Hanoi.
Real estate and tourism projects account for over $16 billion, equivalent to 40.2% of the total amount of foreign capital that will come to Vietnam.
Switzerland’s Trustee Suisse will join hands with Vietnam’s Vinaconex to build the “Asian pearl” complex and a residential area on Phu Quoc Island, Kien Giang province, with $2.7 billion.
The Kumho Asiana of the Republic of Korea plans to invest $2.5 billion in the Giang Vo cultural-trade centre and the My Dinh exhibition centre in Hanoi.
Foreign investors also are interested in thermo-power plants with six projects totalling $8.5 billion. Japan’s Sumitomo wants to build a 2,640 MW plant in the central province of Khanh Hoa with $3.8 billion. Meanwhile, a joint venture between the US’ AES and the Vietnam Coal and Mineral Group will spend $1.463 billion on a 1,200 MW plant in the northern coastal province of Quang Ninh.
Notably, Chinese investors have expressed interest in building five big works in the fields of thermo-power and real estate. During President Nguyen Minh Triet’s visit to the US last May, the two sides signed memorandums of understanding on these five projects.
Specifically, Vietnam’s An Phu Corporation and Vietnam Shipping Line Corporation (Vinalines) and China’s Chieu Thuong Corporation and Khai Phat Bank will build the An Phu Hung new urban zone in HCM City and Ba Ria-Vung Tau province with $1 billion of capital.
In addition, Chinese investors will pump $650 million in a thermo-power plant in HCM City, a luxurious trading zone and the Ha Long-Mong Cai highway, worth $400 million each.
Source: VNE
A large part of this huge source of capital will be poured into hi-tech, thermo-power, real estate and steel projects. Specifically, Taiwan’s Foxconn Group will invest $5 billion to build electronic technology parks in several provinces in Vietnam. Pacific Land Limited from Britain plans to invest $1 billion into the Sai Dong A Hi-tech Park in Hanoi.
Real estate and tourism projects account for over $16 billion, equivalent to 40.2% of the total amount of foreign capital that will come to Vietnam.
Switzerland’s Trustee Suisse will join hands with Vietnam’s Vinaconex to build the “Asian pearl” complex and a residential area on Phu Quoc Island, Kien Giang province, with $2.7 billion.
The Kumho Asiana of the Republic of Korea plans to invest $2.5 billion in the Giang Vo cultural-trade centre and the My Dinh exhibition centre in Hanoi.
Foreign investors also are interested in thermo-power plants with six projects totalling $8.5 billion. Japan’s Sumitomo wants to build a 2,640 MW plant in the central province of Khanh Hoa with $3.8 billion. Meanwhile, a joint venture between the US’ AES and the Vietnam Coal and Mineral Group will spend $1.463 billion on a 1,200 MW plant in the northern coastal province of Quang Ninh.
Notably, Chinese investors have expressed interest in building five big works in the fields of thermo-power and real estate. During President Nguyen Minh Triet’s visit to the US last May, the two sides signed memorandums of understanding on these five projects.
Specifically, Vietnam’s An Phu Corporation and Vietnam Shipping Line Corporation (Vinalines) and China’s Chieu Thuong Corporation and Khai Phat Bank will build the An Phu Hung new urban zone in HCM City and Ba Ria-Vung Tau province with $1 billion of capital.
In addition, Chinese investors will pump $650 million in a thermo-power plant in HCM City, a luxurious trading zone and the Ha Long-Mong Cai highway, worth $400 million each.
Source: VNE
Challenges await new State Bank governor
A lot of works and challenges are awaiting Mr Nguyen Van Giau, who has taken office as the new State Bank of Vietnam governor.
Vietnam’s banking system is welcoming the new leader, who is expected to carry out reform so that the banking system, the heart of the national economy, can have a stable and healthy rhythm. Mr Giau will have to deal with a lot of problems in his term as governor of the central bank.
The first task is to curb the inflation. Prices are escalating again after a long time of being restrained, partially because of the cost push and demand pull.
In the first seven months of the year, the inflation rate climbed to 6.19%, which foreshadows that the inflation rate for 2007 will not be less than 8%, threatening to push the CPI growth rate in 2007 to a record height in the last five years.
The most noteworthy thing is that the inflation rate keeps high when the excess of imports over exports remains high ($5.45bil, or 21% of total export turnover in the first 7 months of the year), which shows that the price imbalance cannot be settled by the excess of imports.
The exchange rate of the local currency, VND, against the greenback and other hard foreign currencies also needs to be set based on a suitable policy which aims to encourage exports, while it must not become a factor leading to high inflation.
In the current situation, when foreign portfolio investment is increasing sharply, the plan to make the local currency into a convertible currency needs thorough consideration. A convertible VND which revaluates precariously is not a good sign. This may foretell possible financial fluctuations (on the stock market), or monetary fluctuations (reduction in national foreign currency reserve), and foreign trade (reduction in exports) as well.
However, the short-term problems can be settled if suitable solutions can be found, and the existing problems can be tackled fundamentally. First of all, Vietnam needs a central bank which operates in the true sense of the word.
In fact, international institutions including the International Monetary Fund (IMF) and the World Bank (WB) all have suggested a more active role of the State Bank of Vietnam in building up and regulating the monetary policy, and taking responsibility for the implementation of the monetary policy, aiming to fulfill the economic targets set by the National Assembly and the government.
A healthy competitive business environment, an equal playing field is the thing commercial banks need, because this is the core factor for the development of the domestic banking system. It is necessary to have a new model for the central bank, and it is necessary to have a new legal framework for the new model. Amending the State Bank Law and Credit Institution Law should be the priority works in the action programme of the new governor.
Supervision and inspection over companies operating in the fields of securities, banking and insurance will be a big problem to deal with. To date, this work has been undertaken by three state management bodies. Experts have asked for the establishment of an organ which can gather the strength and power of the three bodies and take responsibility for the supervision and inspection work.
If the proposal is accepted, the central bank will escape from this work, thus having more time to focus on the monetary policy. This may be an important decision that the governor will consider in his term.
Returning to monetary issues, the new governor will have to deal with the so-called “cash economy”. It has taken a lot of money and time to deal with the problem, but no considerable improvement has been made.
Commercial banks nowadays are trying to expand their ATM networks, but the network only can show its effectiveness in a non-cash economy. In fact, Vietnamese people even use dollars and gold to make payments for their big transactions. The payment in cash makes the expenses of the national economy increasingly high. An economist said that Vietnam’s cash economy had created a barrier to the absorbability of foreign investment flows.
Credit quality will also be one of the pressing issues for the coming time. This will depend on the professionalism of banks, good risk management process, good operation of enterprises and suitable policies.
Source: VNE
Vietnam’s banking system is welcoming the new leader, who is expected to carry out reform so that the banking system, the heart of the national economy, can have a stable and healthy rhythm. Mr Giau will have to deal with a lot of problems in his term as governor of the central bank.
The first task is to curb the inflation. Prices are escalating again after a long time of being restrained, partially because of the cost push and demand pull.
In the first seven months of the year, the inflation rate climbed to 6.19%, which foreshadows that the inflation rate for 2007 will not be less than 8%, threatening to push the CPI growth rate in 2007 to a record height in the last five years.
The most noteworthy thing is that the inflation rate keeps high when the excess of imports over exports remains high ($5.45bil, or 21% of total export turnover in the first 7 months of the year), which shows that the price imbalance cannot be settled by the excess of imports.
The exchange rate of the local currency, VND, against the greenback and other hard foreign currencies also needs to be set based on a suitable policy which aims to encourage exports, while it must not become a factor leading to high inflation.
In the current situation, when foreign portfolio investment is increasing sharply, the plan to make the local currency into a convertible currency needs thorough consideration. A convertible VND which revaluates precariously is not a good sign. This may foretell possible financial fluctuations (on the stock market), or monetary fluctuations (reduction in national foreign currency reserve), and foreign trade (reduction in exports) as well.
However, the short-term problems can be settled if suitable solutions can be found, and the existing problems can be tackled fundamentally. First of all, Vietnam needs a central bank which operates in the true sense of the word.
In fact, international institutions including the International Monetary Fund (IMF) and the World Bank (WB) all have suggested a more active role of the State Bank of Vietnam in building up and regulating the monetary policy, and taking responsibility for the implementation of the monetary policy, aiming to fulfill the economic targets set by the National Assembly and the government.
A healthy competitive business environment, an equal playing field is the thing commercial banks need, because this is the core factor for the development of the domestic banking system. It is necessary to have a new model for the central bank, and it is necessary to have a new legal framework for the new model. Amending the State Bank Law and Credit Institution Law should be the priority works in the action programme of the new governor.
Supervision and inspection over companies operating in the fields of securities, banking and insurance will be a big problem to deal with. To date, this work has been undertaken by three state management bodies. Experts have asked for the establishment of an organ which can gather the strength and power of the three bodies and take responsibility for the supervision and inspection work.
If the proposal is accepted, the central bank will escape from this work, thus having more time to focus on the monetary policy. This may be an important decision that the governor will consider in his term.
Returning to monetary issues, the new governor will have to deal with the so-called “cash economy”. It has taken a lot of money and time to deal with the problem, but no considerable improvement has been made.
Commercial banks nowadays are trying to expand their ATM networks, but the network only can show its effectiveness in a non-cash economy. In fact, Vietnamese people even use dollars and gold to make payments for their big transactions. The payment in cash makes the expenses of the national economy increasingly high. An economist said that Vietnam’s cash economy had created a barrier to the absorbability of foreign investment flows.
Credit quality will also be one of the pressing issues for the coming time. This will depend on the professionalism of banks, good risk management process, good operation of enterprises and suitable policies.
Source: VNE
Vietnam to cut petrol prices by 4 pct to curb inflation
The Vietnamese government has agreed to a plan to reduce gasoline prices by about 4 percent as it seeks to contain high inflation.
Consumer prices in July rose by 8.39 percent from a year earlier due to higher import costs, rising food prices and higher foreign investment. The government says inflation was still under control but tight measures should be taken to curb price hikes.
Prime Minister Nguyen Tan Dung approved a proposal by the Finance Ministry at a cabinet meeting on Sunday to cut retail gasoline prices, a government report said. It gave no timing for the reduction, but the move is expected soon. Prices of other fuel, including coal, and oil products such as diesel and fuel oil will stay unchanged, the report said.
Finance Ministry officials have said retail gasoline prices would be cut by about 500 dong (3 U.S. cents) per litre. The most popular 92-octane petrol grade would be priced at about 11,300 dong (70 U.S. cents) per litre, down from 11,800 dong now.
Despite having allowed distributors to set their own selling prices earlier this year, Hanoi still maintains tight control over fuel prices as it requires sellers to seek government approval before making any changes.
Prime Minister Dung also ordered government offices to lay out effective measures to achieve an economic growth of 8.5 percent for the whole of 2007 and keep inflation below the economic growth rate, the report said.
Last week Hanoi slashed import tariffs on a host of products including cars, steel and several food items such as beef and diary products as it moved to battle rising consumer prices.
Vietnam ranks as Southeast Asia's third largest crude producer after Indonesia and Malaysia but is forced to import most of its oil product needs as it lacks major refineries.
Source: Reuters
Consumer prices in July rose by 8.39 percent from a year earlier due to higher import costs, rising food prices and higher foreign investment. The government says inflation was still under control but tight measures should be taken to curb price hikes.
Prime Minister Nguyen Tan Dung approved a proposal by the Finance Ministry at a cabinet meeting on Sunday to cut retail gasoline prices, a government report said. It gave no timing for the reduction, but the move is expected soon. Prices of other fuel, including coal, and oil products such as diesel and fuel oil will stay unchanged, the report said.
Finance Ministry officials have said retail gasoline prices would be cut by about 500 dong (3 U.S. cents) per litre. The most popular 92-octane petrol grade would be priced at about 11,300 dong (70 U.S. cents) per litre, down from 11,800 dong now.
Despite having allowed distributors to set their own selling prices earlier this year, Hanoi still maintains tight control over fuel prices as it requires sellers to seek government approval before making any changes.
Prime Minister Dung also ordered government offices to lay out effective measures to achieve an economic growth of 8.5 percent for the whole of 2007 and keep inflation below the economic growth rate, the report said.
Last week Hanoi slashed import tariffs on a host of products including cars, steel and several food items such as beef and diary products as it moved to battle rising consumer prices.
Vietnam ranks as Southeast Asia's third largest crude producer after Indonesia and Malaysia but is forced to import most of its oil product needs as it lacks major refineries.
Source: Reuters
Thursday, August 09, 2007
Adjusting IPO roadmap to balance market
Investors and experts have hailed the Government’s adjustment of the initial public offering (IPO) roadmap by state-owned enterprises (SOEs) under the equitisation process, calling it a suitable reaction to market changes.
After several unsuccessful IPOs since March, Prime Minister Nguyen Tan Dung has asked the Ministry of Finance and the State Securities Commission (SSC) to adjust the IPO plan in order to balance supply and demand, reduce the threats of a volatile market and ensure investors’ interests as well as limit state budget losses.
As many as 40 enterprises have made IPOs with nearly 451 million auctioned shares since early this year, according to the Monetary Policy Department under the State Bank of Viet Nam.
In a short period of time, a large amount of shares were issued; whilst investment capital was limited, making auctions bored. The average share price of IPOs since March has risen little over the initial level. Even worse, withdrawal of investors has meant many enterprises had to conduct a second auction. Typical examples were Viet Nam Insurance (BVI) and the PV Insurance Company (PVI).
According to experts, while the securities market has not yet been recovered, if IPOs keep going on as scheduled, shares will be devaluated, causing losses to both the state and investors.
Nguyen Trong Dung, Vice Director of the Government Office’s Enterprise Reform Department revealed that to-be-equitised SOE capital scale is so huge that pumping more commodities into the securities market while supply is over demand will cause loss to the state.
Deputy Director of the Institute for Market and Price Research under the Ministry of Finance Ngo Tri Long agreed that the IPO roadmap applied to major SOEs should be adjusted.
On these ground, several commercial banks reconsidered their IPO itinerary.
From now to the year-end, four commercial banks, including the Bank for Investment and Development of Viet Nam (BIDV) and 21 SOEs are scheduled for equitisation, resulting in a large amount of money about to be injected into the market.
BIDV is preparing for its IPO, but the bank should think twice, no deadline is to be fixed and it is necessary to ensure an appropriate price which will not only benefit the State but also ensure employees’ interests, said BIDV General Director Tran Bac Ha.
This message was echoed by Minister of Finance Vu Van Ninh, who said enterprises’ IPOs should be based on the market’s demand. The process of SOE equitisation will continue to be conducted as defined in a Prime Minister decision, but to-be-equitised enterprises should take time preparing IPOs, the minister added.
In 2007, as many as 20 SOEs, including the Ha Noi Beer Corporation, the Sai Gon Beer Corporation, the Viet Nam Commercial Bank (VCB), the Mekong Delta House Development Bank, the House Development and Investment Corporation and the Ha Noi Urban Development Corporation are set for equitisation. The number should top 71 by 2010.
Source: VNA
After several unsuccessful IPOs since March, Prime Minister Nguyen Tan Dung has asked the Ministry of Finance and the State Securities Commission (SSC) to adjust the IPO plan in order to balance supply and demand, reduce the threats of a volatile market and ensure investors’ interests as well as limit state budget losses.
As many as 40 enterprises have made IPOs with nearly 451 million auctioned shares since early this year, according to the Monetary Policy Department under the State Bank of Viet Nam.
In a short period of time, a large amount of shares were issued; whilst investment capital was limited, making auctions bored. The average share price of IPOs since March has risen little over the initial level. Even worse, withdrawal of investors has meant many enterprises had to conduct a second auction. Typical examples were Viet Nam Insurance (BVI) and the PV Insurance Company (PVI).
According to experts, while the securities market has not yet been recovered, if IPOs keep going on as scheduled, shares will be devaluated, causing losses to both the state and investors.
Nguyen Trong Dung, Vice Director of the Government Office’s Enterprise Reform Department revealed that to-be-equitised SOE capital scale is so huge that pumping more commodities into the securities market while supply is over demand will cause loss to the state.
Deputy Director of the Institute for Market and Price Research under the Ministry of Finance Ngo Tri Long agreed that the IPO roadmap applied to major SOEs should be adjusted.
On these ground, several commercial banks reconsidered their IPO itinerary.
From now to the year-end, four commercial banks, including the Bank for Investment and Development of Viet Nam (BIDV) and 21 SOEs are scheduled for equitisation, resulting in a large amount of money about to be injected into the market.
BIDV is preparing for its IPO, but the bank should think twice, no deadline is to be fixed and it is necessary to ensure an appropriate price which will not only benefit the State but also ensure employees’ interests, said BIDV General Director Tran Bac Ha.
This message was echoed by Minister of Finance Vu Van Ninh, who said enterprises’ IPOs should be based on the market’s demand. The process of SOE equitisation will continue to be conducted as defined in a Prime Minister decision, but to-be-equitised enterprises should take time preparing IPOs, the minister added.
In 2007, as many as 20 SOEs, including the Ha Noi Beer Corporation, the Sai Gon Beer Corporation, the Viet Nam Commercial Bank (VCB), the Mekong Delta House Development Bank, the House Development and Investment Corporation and the Ha Noi Urban Development Corporation are set for equitisation. The number should top 71 by 2010.
Source: VNA
Tuesday, August 07, 2007
VN should sacrifice growth to stabilise prices
The inflation rate may be two digits for 2007, according to Dr Tran Dinh Thien, Deputy Head of the Vietnam Economics Institute. In order to stabilise prices in this context, the government should reconsider the targeted 9% economic growth rate.
All countries in the world bear the same pressure from the price increases. How can they all successfully control the prices in their domestic markets?
The structure of the basket of goods which is used for calculating consumer price index (CPI) in Vietnam is different from those in other countries. In our ‘basket’, food and foodstuff products account for more than 40% of total product and service items, while the proportion is smaller in other countries’ baskets. In poor and developing countries with low development levels, more raw products are listed in the ‘basket’. Therefore, in controlling prices, the government should draw up solutions considering the specific characteristics of Vietnam.
What are solutions then?
The government is now focusing on lowering taxes in order to stabilise the prices of key products, like oil and petrol, and steel, which can help stimulate growth. Meanwhile, the prices of food and foodstuffs will not see big increases.
Do you think tax reductions will help stop the price increase wave?
It is necessary not only to lower taxes but also to issue government bonds to withdraw cash from circulation. It is necessary to lower government spending. Reality shows that when the inflation rate is too high, the most important thing to do is to urgently cut government spending and raise interest rates in order to attract idle capital from the public. Currently, the budget overspending remains within control. But I have to say that the government still has to cut expenditures in the context of overly high price increases, causing the inflation. The expenditure cuts will help reduce the inflation rate.
Experts have forecast that prices will keep rising towards the year’s end due to many factors. Could you please give other reasons behind the price increases?
In the first six months of the year, the government disbursed less than 50% of investment capital, while it is striving to reach the growth rate of 9% this year. Therefore, the government has to pump more money in the economy from now until the year’s end.
Factors that may cause price increases in the last months of 2007 prove to be very strong, while the volume of cash in circulation remains very big. I think that the price increase will be two digits.
However, I do not think that inflation has reached the chaotic level. We can control the situation if the inflation rate is less than 10%, and it would be fine if we could not gain the targeted economic growth rate of 9% this year.
Source: VNE
All countries in the world bear the same pressure from the price increases. How can they all successfully control the prices in their domestic markets?
The structure of the basket of goods which is used for calculating consumer price index (CPI) in Vietnam is different from those in other countries. In our ‘basket’, food and foodstuff products account for more than 40% of total product and service items, while the proportion is smaller in other countries’ baskets. In poor and developing countries with low development levels, more raw products are listed in the ‘basket’. Therefore, in controlling prices, the government should draw up solutions considering the specific characteristics of Vietnam.
What are solutions then?
The government is now focusing on lowering taxes in order to stabilise the prices of key products, like oil and petrol, and steel, which can help stimulate growth. Meanwhile, the prices of food and foodstuffs will not see big increases.
Do you think tax reductions will help stop the price increase wave?
It is necessary not only to lower taxes but also to issue government bonds to withdraw cash from circulation. It is necessary to lower government spending. Reality shows that when the inflation rate is too high, the most important thing to do is to urgently cut government spending and raise interest rates in order to attract idle capital from the public. Currently, the budget overspending remains within control. But I have to say that the government still has to cut expenditures in the context of overly high price increases, causing the inflation. The expenditure cuts will help reduce the inflation rate.
Experts have forecast that prices will keep rising towards the year’s end due to many factors. Could you please give other reasons behind the price increases?
In the first six months of the year, the government disbursed less than 50% of investment capital, while it is striving to reach the growth rate of 9% this year. Therefore, the government has to pump more money in the economy from now until the year’s end.
Factors that may cause price increases in the last months of 2007 prove to be very strong, while the volume of cash in circulation remains very big. I think that the price increase will be two digits.
However, I do not think that inflation has reached the chaotic level. We can control the situation if the inflation rate is less than 10%, and it would be fine if we could not gain the targeted economic growth rate of 9% this year.
Source: VNE
Slackening IPOs to harmonise the market
The number of new accounts at securities companies has been increasing rapidly, while foreign investment funds are queuing to enter Vietnam. Meanwhile, the stock market remains gloomy, why? Vu Thanh Tu Anh, Director of Research at the Fulbright Economics Teaching Programme in Vietnam, talked about this.
What would you say about the two contradictory factors, which may be called a paradox?
In fact, the two factors do not conflict. People can make investment when the market rises and make investment when the market falls as well.
You may see that many foreign investors, though having entered Vietnam, have just made initial preparatory works, while they have not made big investment deals. The right time for them to make investment activities remains in their thoughts.
I think that one of the reasons that have prompted investors to come to Vietnam at this moment is that they are awaiting upcoming share issuances. As you may know, a lot of big Vietnamese enterprises will make IPOs in the coming months, while several hundred other enterprises will complete equitisation with the total capital of up to several hundred thousand billion dong.
It is very difficult to estimate the total amount of capital foreign investors are going to inject in Vietnam, but I know for sure that the volume is not small. Investors have opportunities and are thinking of how to grasp the opportunities. They act rationally, not by feeling.
There are two contradictory opinions about the IPOs by big general corporations scheduled for the end of the year. What is your opinion about this?
Some experts have said that the market is now in ‘indigestion’. However, in order to know if the market is oversupplied, we should measure its capability of absorbing capital from the market.
With the high capability of foreign investors that we have mentioned before, and the big capital sums of domestic investors, I think that the market still can absorb the capital to be brought about by the big IPOs and the equitisations in the last months of the year.
I think what we see now on the market is ‘expectation’ rather than ‘indigestion’.
An important issue we should discuss is at what prices the market will absorb the IPOs.
If the state aims to optimise the turnover from equitisation, it should re-time the dates and the roadmaps for equitisation and IPOs.
In this case, I think, it is quite normal to make changes suitable to the market’s circumstances, since IPOs and equitisations themselves are kinds of market activities.
Could you please tell us more about this?
A couple of weeks ago, the government and the State Securities Commission suggested that companies and banks reconsider the timing of their IPOs. The move showed that the government was trying to make an adjustment to harmonise the roadmap of big corporations’ IPOs.
If the IPOs are still be carried out as they were previously planned, the scenario will be as follows. Foreign investors now seem to be delaying their investment deals to wait for the IPOs. If the state still follows the planned roadmap, supply will sharply increase, thus dropping prices, which can help the investors successfully buy shares at prices lower than the levels they should have.
If this happens, the money the state will collect from IPOs will be lower. If the market still cannot absorb the securities to be issued even with the low prices of shares, the state may have to reconsider raising the maximum foreign ownership ratio in local joint stock companies. And this is exactly what foreign investors want. They have even put pressure on the government. (The maximum foreign ownership is 49% of total shares in listed companies and 30% in banks).
In general, if the state tries to maintain the previous IPO plan, it would still bear hard pressure which may force it to make further adjustments. I mean that if it does not re-time the IPOs now, it will still have to do that later. Because so, it would be better to make the adjustment right now.
Source: VNE
What would you say about the two contradictory factors, which may be called a paradox?
In fact, the two factors do not conflict. People can make investment when the market rises and make investment when the market falls as well.
You may see that many foreign investors, though having entered Vietnam, have just made initial preparatory works, while they have not made big investment deals. The right time for them to make investment activities remains in their thoughts.
I think that one of the reasons that have prompted investors to come to Vietnam at this moment is that they are awaiting upcoming share issuances. As you may know, a lot of big Vietnamese enterprises will make IPOs in the coming months, while several hundred other enterprises will complete equitisation with the total capital of up to several hundred thousand billion dong.
It is very difficult to estimate the total amount of capital foreign investors are going to inject in Vietnam, but I know for sure that the volume is not small. Investors have opportunities and are thinking of how to grasp the opportunities. They act rationally, not by feeling.
There are two contradictory opinions about the IPOs by big general corporations scheduled for the end of the year. What is your opinion about this?
Some experts have said that the market is now in ‘indigestion’. However, in order to know if the market is oversupplied, we should measure its capability of absorbing capital from the market.
With the high capability of foreign investors that we have mentioned before, and the big capital sums of domestic investors, I think that the market still can absorb the capital to be brought about by the big IPOs and the equitisations in the last months of the year.
I think what we see now on the market is ‘expectation’ rather than ‘indigestion’.
An important issue we should discuss is at what prices the market will absorb the IPOs.
If the state aims to optimise the turnover from equitisation, it should re-time the dates and the roadmaps for equitisation and IPOs.
In this case, I think, it is quite normal to make changes suitable to the market’s circumstances, since IPOs and equitisations themselves are kinds of market activities.
Could you please tell us more about this?
A couple of weeks ago, the government and the State Securities Commission suggested that companies and banks reconsider the timing of their IPOs. The move showed that the government was trying to make an adjustment to harmonise the roadmap of big corporations’ IPOs.
If the IPOs are still be carried out as they were previously planned, the scenario will be as follows. Foreign investors now seem to be delaying their investment deals to wait for the IPOs. If the state still follows the planned roadmap, supply will sharply increase, thus dropping prices, which can help the investors successfully buy shares at prices lower than the levels they should have.
If this happens, the money the state will collect from IPOs will be lower. If the market still cannot absorb the securities to be issued even with the low prices of shares, the state may have to reconsider raising the maximum foreign ownership ratio in local joint stock companies. And this is exactly what foreign investors want. They have even put pressure on the government. (The maximum foreign ownership is 49% of total shares in listed companies and 30% in banks).
In general, if the state tries to maintain the previous IPO plan, it would still bear hard pressure which may force it to make further adjustments. I mean that if it does not re-time the IPOs now, it will still have to do that later. Because so, it would be better to make the adjustment right now.
Source: VNE
Stock capitalisation value to reach 70% of GDP by 2020
The stock market capitalisation value will reach 50% of GDP by 2010 and 70% of GDP by 2020, according to the project on capital market development.
Prime Minister Nguyen Tan Dung has approved the project on developing Vietnam’s capital market by 2010 with the vision towards 2020, under which the stock capitalisation value will reach 70% by 2020.
The aim is to develop a diversified capital market in order to meet the demand for capital of the national economy.
Under the newly approved project, the stock market will play the decisive role in making the capital market become an important part of Vietnam’s financial market. By 2020, Vietnam’s capital market needs to have a development level equal to other markets in the region.
The capital market needs to be fully worked-out in structure, comprising the share market, bond market, derivatives markets, official and OTC markets, and operate under the best internationally standardised rules. Vietnam’s capital market, as a developed market, will also have the capability to link with regional and international markets.
In the immediate time, Vietnam will gather forces on developing the scale and perfecting the structure of the capital market, improve the quality of and diversify commodities of the market, including types of bonds. Moreover, Vietnam will also focus on developing derivative products like options or forward contracts.
The government will push up the equitisation of state-owned big general corporations, economic groups, and state-owned banks, associate the equitisation with IPO and listing on the bourse. The state will sell more shares in enterprises in which the state does not need to hold controlling stakes. Foreign invested enterprises, which are now operating as limited companies, will shift to operate as joint stock companies which list their shares on the stock market.
The intermediary institutions and market service providers will see considerable development in the number and quality of services (securities companies, investment fund management companies), while a market of credit rating will gradually take shape in Vietnam.
Vietnam plans to allow the establishment of credit rating firms that can meet requirements, and allow several prestigious foreign institutions to operate in Vietnam.
Vietnam will fulfill its commitments on market opening by allowing professional investors to enter Vietnam under the committed roadmap. In the future, Vietnam Social Insurance and Post Savings will be allowed to make investment in the capital market. Vietnam encourages foreign based investment funds to make long-term investment in Vietnam.
Source: VNE
Prime Minister Nguyen Tan Dung has approved the project on developing Vietnam’s capital market by 2010 with the vision towards 2020, under which the stock capitalisation value will reach 70% by 2020.
The aim is to develop a diversified capital market in order to meet the demand for capital of the national economy.
Under the newly approved project, the stock market will play the decisive role in making the capital market become an important part of Vietnam’s financial market. By 2020, Vietnam’s capital market needs to have a development level equal to other markets in the region.
The capital market needs to be fully worked-out in structure, comprising the share market, bond market, derivatives markets, official and OTC markets, and operate under the best internationally standardised rules. Vietnam’s capital market, as a developed market, will also have the capability to link with regional and international markets.
In the immediate time, Vietnam will gather forces on developing the scale and perfecting the structure of the capital market, improve the quality of and diversify commodities of the market, including types of bonds. Moreover, Vietnam will also focus on developing derivative products like options or forward contracts.
The government will push up the equitisation of state-owned big general corporations, economic groups, and state-owned banks, associate the equitisation with IPO and listing on the bourse. The state will sell more shares in enterprises in which the state does not need to hold controlling stakes. Foreign invested enterprises, which are now operating as limited companies, will shift to operate as joint stock companies which list their shares on the stock market.
The intermediary institutions and market service providers will see considerable development in the number and quality of services (securities companies, investment fund management companies), while a market of credit rating will gradually take shape in Vietnam.
Vietnam plans to allow the establishment of credit rating firms that can meet requirements, and allow several prestigious foreign institutions to operate in Vietnam.
Vietnam will fulfill its commitments on market opening by allowing professional investors to enter Vietnam under the committed roadmap. In the future, Vietnam Social Insurance and Post Savings will be allowed to make investment in the capital market. Vietnam encourages foreign based investment funds to make long-term investment in Vietnam.
Source: VNE
Rubber group targets multi-sector development
Multi-sector development is the new way forward for the Vietnam Rubber Group (VRG) as it becomes a pioneer in the agricultural sector changing its operation under the agro-industry and service structure.
In addition to latex processing, VRG is striving to raise annual outputs to 3 million sets of auto tyres and to 700 km of conveyer belts as well as step up production of rubber materials for other industries, said Tran Kien Quyet, the group’s CEO.
Last year, the group invested over 400 billion VND (25 million USD) in the Ben Thanh Rubber Conveyer Belt Factory in Ho Chi Minh City’s Cu Chi district and a wood processing factory in central Quang Tri province. Their products will be used for cement and coal sectors with prices two or three times cheaper than imported materials.
Quyet said that his group is promoting cooperation with the Da Nang Rubber Company, the Southern Rubber Company and India’s Aboll Company to invest in tyre production and raise the capacity of its four existing wood processing factories.
The group also plans to build a new 50,000 cu.m wood processing plant in the southern province of Binh Phuoc, he added.
VRG has also injected 300 million USD into other sectors such as engineering production, seaport management, transportation, construction materials, real estate, hotel services and tourism.
In order to address the problem that land available for domestic rubber plantation has been reduced, several VRG affiliates have intended to develop rubber growing and processing in Vietnam's neighbouring countries Laos and Cambodia.
Huynh Van Khiet, Director of the Dac Lac Rubber Company, an affiliate of VRG, said his company decided to build rubber processing plants in Laos and Cambodia because the two countries offer more agreeable land and climate conditions for the development of rubber trees.
Over the past few decades, rubber has been a valuable industrial tree in Vietnam. Latex is one of the country’s key export items with a turnover of nearly 1.3 billion USD in 2006 and the tree has made remarkable contributions to forest coverage, land erosion prevention and poverty reduction in many localities.
Vietnam is now the world’s sixth largest rubber producer and fourth exporter (after Thailand, Indonesia and Malaysia), with a total area of 450,000 ha and an annual output of 400,000 tonnes. China is the largest importer of Vietnam's rubber.
Vietnam’s rubber area and output are predicted to continue increasing in the coming years and may reach 700,000 ha and 600,000 tonnes respectively in 2010. Export turnover of this product is expected to remain at over 1 billion USD per year.
Source: VNE
In addition to latex processing, VRG is striving to raise annual outputs to 3 million sets of auto tyres and to 700 km of conveyer belts as well as step up production of rubber materials for other industries, said Tran Kien Quyet, the group’s CEO.
Last year, the group invested over 400 billion VND (25 million USD) in the Ben Thanh Rubber Conveyer Belt Factory in Ho Chi Minh City’s Cu Chi district and a wood processing factory in central Quang Tri province. Their products will be used for cement and coal sectors with prices two or three times cheaper than imported materials.
Quyet said that his group is promoting cooperation with the Da Nang Rubber Company, the Southern Rubber Company and India’s Aboll Company to invest in tyre production and raise the capacity of its four existing wood processing factories.
The group also plans to build a new 50,000 cu.m wood processing plant in the southern province of Binh Phuoc, he added.
VRG has also injected 300 million USD into other sectors such as engineering production, seaport management, transportation, construction materials, real estate, hotel services and tourism.
In order to address the problem that land available for domestic rubber plantation has been reduced, several VRG affiliates have intended to develop rubber growing and processing in Vietnam's neighbouring countries Laos and Cambodia.
Huynh Van Khiet, Director of the Dac Lac Rubber Company, an affiliate of VRG, said his company decided to build rubber processing plants in Laos and Cambodia because the two countries offer more agreeable land and climate conditions for the development of rubber trees.
Over the past few decades, rubber has been a valuable industrial tree in Vietnam. Latex is one of the country’s key export items with a turnover of nearly 1.3 billion USD in 2006 and the tree has made remarkable contributions to forest coverage, land erosion prevention and poverty reduction in many localities.
Vietnam is now the world’s sixth largest rubber producer and fourth exporter (after Thailand, Indonesia and Malaysia), with a total area of 450,000 ha and an annual output of 400,000 tonnes. China is the largest importer of Vietnam's rubber.
Vietnam’s rubber area and output are predicted to continue increasing in the coming years and may reach 700,000 ha and 600,000 tonnes respectively in 2010. Export turnover of this product is expected to remain at over 1 billion USD per year.
Source: VNE
Rising inflation undermines growth
The consumer price index (CPI) has increased continuously for the last seven months. The figure rose 6.19% in comparison with late last year.
The increase has caused a "price fever" and threatened economic growth.
People on low incomes, such as farmers and workers, have suffered greatly and their daily life has become more difficult.
Earlier this month, the Prime Minister has asked relevant agencies to take measures to reduce the CPI. In response, the Ministry of Finance has suggested a temporary reduction in import taxes on more than 20 essential commodities in food, fodder, material for construction, cosmetics, electronics and automobiles starting on August 8.
In particular, food prices would be cut by more than 50%.
Local prices have increased in line with international prices. The ministry believes that the lower tax cut would significantly reduce CPI in local market soon and force local producers providing cheaper products.
In addition, some local products' taxation level will be considered.
Furthermore, the ministry will allow enterprises extended time to pay value added taxes for imported agricultural products to help them cut their expenses.
Price supervision for import, production, circulation and retail sales will be tightened to avoid speculation.
Initially, five businesses in the steel industry and four enterprises in the gas industry will soon be checked to find out why they have sharply increased their prices in the last two months.
Last week, the Central Institute for Economic Management (CIEM) caused a "shock" in public opinion as they announced their survey results that the average Vietnamese business spent 1,959 employee-hour per year non tax formalities.
The news was astounding in light of the government having implemented administrative reform for years with significant results.
With so much time and human resources lost on tax compliance, a local business has less to focus on other needs, thus it cannot be as competitive. This is especially true for small-and-medium size businesses.
Another survey from the World Bank pointed out that small and medium sized enterprises need additional time to do paperwork regarding value added taxes, enterprise income taxes and social insurance. Altogether, this requires approximately 1,050 hours per year.
Therefore, the fact that enterprises spend a great deal of time and energy on tax compliance is a reality.
Lower end car manufacturers are staking out a larger piece of the pie as they build factories and assemble car parts right here in Vietnam.
After Malaysian JRD Vietnam completed their factory in the central province of Phu Yen, they starting coming out with nine automobile models ranging from sedan to pick-up trucks priced under US$20,000.
Duc Phuong Limited released a five-seat sedan similar to a popular Korean Matiz, but with a competitive price sticker two thirds that of Matiz. Their seven-seat automobile is being offered for around $17,000.
Truong Hai Automobile Join stock company has also joined the market by importing the Kia sedan from South Korea. After selling 400 Kia's, the company began construction on its second factory to assemble the model in Vietnam.
These companies offer a good alternative to automobiles sold at high prices by world famous automobile companies with well-known brand names doing business in Vietnam.
The latest players in the automobile industry here are attracting customers keen on prices, but it will take time to see how their quality holds up. In the meantime, local consumers looking for a car will have more to choose from.
Source: VNS
The increase has caused a "price fever" and threatened economic growth.
People on low incomes, such as farmers and workers, have suffered greatly and their daily life has become more difficult.
Earlier this month, the Prime Minister has asked relevant agencies to take measures to reduce the CPI. In response, the Ministry of Finance has suggested a temporary reduction in import taxes on more than 20 essential commodities in food, fodder, material for construction, cosmetics, electronics and automobiles starting on August 8.
In particular, food prices would be cut by more than 50%.
Local prices have increased in line with international prices. The ministry believes that the lower tax cut would significantly reduce CPI in local market soon and force local producers providing cheaper products.
In addition, some local products' taxation level will be considered.
Furthermore, the ministry will allow enterprises extended time to pay value added taxes for imported agricultural products to help them cut their expenses.
Price supervision for import, production, circulation and retail sales will be tightened to avoid speculation.
Initially, five businesses in the steel industry and four enterprises in the gas industry will soon be checked to find out why they have sharply increased their prices in the last two months.
Last week, the Central Institute for Economic Management (CIEM) caused a "shock" in public opinion as they announced their survey results that the average Vietnamese business spent 1,959 employee-hour per year non tax formalities.
The news was astounding in light of the government having implemented administrative reform for years with significant results.
With so much time and human resources lost on tax compliance, a local business has less to focus on other needs, thus it cannot be as competitive. This is especially true for small-and-medium size businesses.
Another survey from the World Bank pointed out that small and medium sized enterprises need additional time to do paperwork regarding value added taxes, enterprise income taxes and social insurance. Altogether, this requires approximately 1,050 hours per year.
Therefore, the fact that enterprises spend a great deal of time and energy on tax compliance is a reality.
Lower end car manufacturers are staking out a larger piece of the pie as they build factories and assemble car parts right here in Vietnam.
After Malaysian JRD Vietnam completed their factory in the central province of Phu Yen, they starting coming out with nine automobile models ranging from sedan to pick-up trucks priced under US$20,000.
Duc Phuong Limited released a five-seat sedan similar to a popular Korean Matiz, but with a competitive price sticker two thirds that of Matiz. Their seven-seat automobile is being offered for around $17,000.
Truong Hai Automobile Join stock company has also joined the market by importing the Kia sedan from South Korea. After selling 400 Kia's, the company began construction on its second factory to assemble the model in Vietnam.
These companies offer a good alternative to automobiles sold at high prices by world famous automobile companies with well-known brand names doing business in Vietnam.
The latest players in the automobile industry here are attracting customers keen on prices, but it will take time to see how their quality holds up. In the meantime, local consumers looking for a car will have more to choose from.
Source: VNS
Friday, August 03, 2007
Prices up, salaries remain stationary
While the CPI has increased dramatically by 6.19% in the last seven months, the incomes of employees have stood still, thus lightening consumers’ pockets.
Dairy products have increased by 10-15% in price so far this year. Oil, vegetables, pork, the main foods of Vietnamese people, all have seen sharp price increases: the price of oil has risen by VND3,000/litre, vegetables and fruits by VND2,000/kg, and pork by VND4,000/kg.
Mrs Tam, who has a stand at Hom market in Hanoi, said she previously spent VND40-50,000 on a meal for three persons, but now she had to pay VND100,000 for the same meal.
Meanwhile, the incomes of most consumers have remained unchanged. According to the Ministry of Labour, War Invalids and Social Affairs (MoLISA), there are 11mil wage earners, including 0.5mil people working in foreign invested enterprises, which means that 10.5mil are eligible for salary adjustments.
MoLISA said that under the roadmap on salary reform for 2003-2007, the new turn of adjusting the minimum salary level will only come after October 1, 2007 (the minimum salary levels are now different for different economic sectors, but there will be only one level for all economic sectors by 2010). This means that those 10.5mil workers still have to wait until the end of 2007 to get raises.
A recent survey of employees’ salaries in 2007 conducted by Navigos Group showed that the average salary of domestic enterprises (both private owned and state owned) is much lower than that of foreign invested enterprises. However, it is not easy to make adjustments in salary schemes in foreign invested enterprises.
Experts have said that every foreign invested enterprise has its own policy on wage control, and the policy cannot be affected by the CPI or any outside impacts.
Curbing the price increases proves to be a headache for the newly set up Government. The Prime Minister has released a lot of instructions in order to control the market and avoid further price increases, and people hope the drastic measures will be effective.
Source: VNE
Dairy products have increased by 10-15% in price so far this year. Oil, vegetables, pork, the main foods of Vietnamese people, all have seen sharp price increases: the price of oil has risen by VND3,000/litre, vegetables and fruits by VND2,000/kg, and pork by VND4,000/kg.
Mrs Tam, who has a stand at Hom market in Hanoi, said she previously spent VND40-50,000 on a meal for three persons, but now she had to pay VND100,000 for the same meal.
Meanwhile, the incomes of most consumers have remained unchanged. According to the Ministry of Labour, War Invalids and Social Affairs (MoLISA), there are 11mil wage earners, including 0.5mil people working in foreign invested enterprises, which means that 10.5mil are eligible for salary adjustments.
MoLISA said that under the roadmap on salary reform for 2003-2007, the new turn of adjusting the minimum salary level will only come after October 1, 2007 (the minimum salary levels are now different for different economic sectors, but there will be only one level for all economic sectors by 2010). This means that those 10.5mil workers still have to wait until the end of 2007 to get raises.
A recent survey of employees’ salaries in 2007 conducted by Navigos Group showed that the average salary of domestic enterprises (both private owned and state owned) is much lower than that of foreign invested enterprises. However, it is not easy to make adjustments in salary schemes in foreign invested enterprises.
Experts have said that every foreign invested enterprise has its own policy on wage control, and the policy cannot be affected by the CPI or any outside impacts.
Curbing the price increases proves to be a headache for the newly set up Government. The Prime Minister has released a lot of instructions in order to control the market and avoid further price increases, and people hope the drastic measures will be effective.
Source: VNE
Wednesday, August 01, 2007
VN needs 5-10 years to catch up
Hans-Ulrich Doerig, Vice Chairman of the Board of Directors of Credit Suisse, said in an interview with VietNamNet that changes could not come overnight, and Vietnam would need some five to 10 years to catch up with other countries, becoming more competitive in banking and finance.
What would you say about the potentials of Vietnam’s banking and finance sector, as an expert who has worked in the banking sector for many years, especially in Asian countries?
Vietnam is determined to build a market economy and follow an open-door policy. However, you cannot expect development overnight; you have to go step by step. One should not think of creating changes overnight. All countries have to follow a progressive model. You cannot skip on the way. If you go too fast, you may face crises.
The government of every country has to define goals for every stage of development. It will take Vietnam years to find suitable final solutions.
However, I think that the Government of Vietnam is on the right track and going at a suitable pace. There is no need to go faster or slower. In the time to come, the government will allow the deeper participation of foreign investors in the banking and finance sector. But it needs more time. Vietnam will need five to ten years to catch up with other countries in the world and become more competitive.
What suggestions would you give in order to, as you said, become more competitive, attract investment and catch up with the world in the banking and finance sector?
Firstly, Vietnam should maintain the low-cost scheme for the next five or ten years. Only by doing so can Vietnam maintain its competitiveness. If the inflation rate is high, which means higher costs and higher prices, you will find it hard to attract investment to Vietnam.
The most important thing for Vietnam is the anticipation of the mechanism. Investors should know under which mechanism they make investment.
In order to become successful, one should keep a positive view on the prospects of the country and the behaviour of people towards their work. If you keep a positive attitude, you will be able to work better and more effectively. Vietnam is one of the countries which own such advantageous factors.
Do you have any investment plan in Vietnam?
I studied in Japan in 1975-1976. I went to China 24 years ago, and then returned to the country two times at least every year. I can say I know a lot about Asia. I have had enough time to discover the continent and work with people here. My strategic interest in Vietnam, the promising nation, becomes bigger every day.
We now have a fund for the group’s activities in Vietnam. I myself got a volume of Vietnam’s Government bonds when Vietnam launched the bonds on the international market two years ago.
We think Vietnam is a special case among the burgeoning economies, and it will remain a burgeoning economy for many more years.
Do you have any suggestions about what to do to get success?
Vietnamese people are intelligent and they need to be given opportunities. They need to be well trained, and they need to learn experience from practice as well. Young people sometimes are impatient, they go too fast, and therefore, they can easily make mistakes. Many young people think that they should change their work after six months. In fact, they need to do the same work for at least three years to get more experience. They should work long enough to make mistakes and have enough time to correct mistakes.
What has helped create the success and fame of Credit Suisse?
First, we have a history of 151 years of operation. Second, we have big financial capability. Third, we have a network throughout the world.
150 years ago, we were not a famous group. Our leaders tried to expand our business scope. We brought new ideas into life and experimented with initiatives.
Fifth, we have staffs coming from different nations, and the diversification in nationality can bring creativeness and differentiation.
Now we are one of the 25 biggest banks among 70,000 banks around the world.
Source: VNE
What would you say about the potentials of Vietnam’s banking and finance sector, as an expert who has worked in the banking sector for many years, especially in Asian countries?
Vietnam is determined to build a market economy and follow an open-door policy. However, you cannot expect development overnight; you have to go step by step. One should not think of creating changes overnight. All countries have to follow a progressive model. You cannot skip on the way. If you go too fast, you may face crises.
The government of every country has to define goals for every stage of development. It will take Vietnam years to find suitable final solutions.
However, I think that the Government of Vietnam is on the right track and going at a suitable pace. There is no need to go faster or slower. In the time to come, the government will allow the deeper participation of foreign investors in the banking and finance sector. But it needs more time. Vietnam will need five to ten years to catch up with other countries in the world and become more competitive.
What suggestions would you give in order to, as you said, become more competitive, attract investment and catch up with the world in the banking and finance sector?
Firstly, Vietnam should maintain the low-cost scheme for the next five or ten years. Only by doing so can Vietnam maintain its competitiveness. If the inflation rate is high, which means higher costs and higher prices, you will find it hard to attract investment to Vietnam.
The most important thing for Vietnam is the anticipation of the mechanism. Investors should know under which mechanism they make investment.
In order to become successful, one should keep a positive view on the prospects of the country and the behaviour of people towards their work. If you keep a positive attitude, you will be able to work better and more effectively. Vietnam is one of the countries which own such advantageous factors.
Do you have any investment plan in Vietnam?
I studied in Japan in 1975-1976. I went to China 24 years ago, and then returned to the country two times at least every year. I can say I know a lot about Asia. I have had enough time to discover the continent and work with people here. My strategic interest in Vietnam, the promising nation, becomes bigger every day.
We now have a fund for the group’s activities in Vietnam. I myself got a volume of Vietnam’s Government bonds when Vietnam launched the bonds on the international market two years ago.
We think Vietnam is a special case among the burgeoning economies, and it will remain a burgeoning economy for many more years.
Do you have any suggestions about what to do to get success?
Vietnamese people are intelligent and they need to be given opportunities. They need to be well trained, and they need to learn experience from practice as well. Young people sometimes are impatient, they go too fast, and therefore, they can easily make mistakes. Many young people think that they should change their work after six months. In fact, they need to do the same work for at least three years to get more experience. They should work long enough to make mistakes and have enough time to correct mistakes.
What has helped create the success and fame of Credit Suisse?
First, we have a history of 151 years of operation. Second, we have big financial capability. Third, we have a network throughout the world.
150 years ago, we were not a famous group. Our leaders tried to expand our business scope. We brought new ideas into life and experimented with initiatives.
Fifth, we have staffs coming from different nations, and the diversification in nationality can bring creativeness and differentiation.
Now we are one of the 25 biggest banks among 70,000 banks around the world.
Source: VNE
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