Economic Information in Vietnam

Phu Yen's unforgettable vegetable village

2010-11-04T15:00:00.001-07:00

Ngoc Lang is known as a peaceful village with vegetable fields that are as green as jade stones.

It is located in Binh Ngoc Commune, Tuy Hoa City, Phu Yen Province.

The village is compared to a child protected and nurtured by two mothers that are the Chua and Ba rivers. Silt of the two rivers has raised the level of its land. This has allowed Ngoc Lang to become the village providing the largest amount of vegetables in Phu Yen Province. With fertile land and knowledgeable villagers, the vegetables of Ngoc Lang village are also sold throughout Vietnam.

Locals grow vegetables year round except in September and October due to the rain season.

At only 4am, when the whole city is not yet awake, locals head to the fields to care for their vegetables. Some growers harvest vegetables and some work on land.

The flood at the end of 2009 destroyed all vegetable fields. However, one year later, the vegetable fields have once again grown thanks to all effort of hard-working growers.

Lying near National Road 1A and the North-South railway, through windows, passengers can have a chance to enjoy vast vegetable fields on which growers with white conical hats are working.

It is a serene sight that makes passengers forget about the long journey and reflect on the beauty of the village and its villagers.

It’s difficult to see boundary of vast green vegetable fields. From a far distance, there is Nhan Tower, which is a tourism site of Phu Yen Province

Growers here often have breakfast at the field because they have to wake up very early to work

Smile of Ngoc Lang's villagers

Dollar changes hands at nearly VND21,000 outside banks

2010-10-25T17:13:00.000-07:00

While banks continue quoting the U.S. dollar at VND19,500, the greenback is changing hands on the unofficial market at a new record of nearly VND21,000 yesterday afternoon.

In HCMC, gold shops in the city’s center sold the dollar at VND20,950-20,960 while the price in Hanoi was almost the same yesterday.

Although banks cannot find dollars to sell to enterprises with earnest demands, dollar deposits at banks in HCMC continued rising. The central bank’s HCMC branch said mobilized dollar funds in HCMC increased by 2% in October and by nearly 15% from late last year.

The central bank also said deposits in all foreign currencies, with the greenback taking the lion’s share, now account for over a quarter of total mobilization in the city.

These figures showed that people still prefer the dollar as a safe asset compared to the local currency. Furthermore, enterprises also keep dollars in their accounts instead of selling dollar funds to banks, which are now thirsty for the dollar to meet rising demands in the rest of the year.

As of end-October, dollar mobilization at banks in HCMC amounted to an equivalent of nearly VND192 trillion, or roughly US$10 billion. However, 40%-45% of such dollar deposits belonged to enterprises, said a source from the central bank’s HCMC branch.

Therefore, given the formal dollar price at VND19,500, enterprises now have over US$4 billion in their accounts at commercial banks in HCMC although the highest deposit rate for dollars for enterprises is only 1% per year.

The State Bank of Vietnam has got from its HCMC branch a report detailing its concerns over the big difference between official and unofficial dollar prices as well as the feverish thirst for dollars. However, there has yet any official word from the central bank on this issue as of late yesterday.

The source from the branch said the chairman of the HCMC government had asked companies in the city to sell dollars to banks in hopes of easing the strained dollar supply.

Businesses grapple with forex rate volatility

2010-10-24T23:13:00.001-07:00

Many local enterprises are struggling to cope with the rise of the U.S. dollar against the local dong.

The dollar price on the unofficial market in HCMC on Monday afternoon was VND20,400 for buying and VND20,450 for selling, and the respective prices in Hanoi were VND20,430 and VND20,470. Those prices were up VND50 from last Friday and VND430 from 10 days ago.

In industries where 70% to 80% of materials are imported, the strengthening dollar is hitting them hard.

Bui Quoc Cuong, director of Long Chau Group, an animal feed manufacturer in Dong Nai Province, said import prices of materials had edged up 30% in the past two or three months.

“For palm oil, coco oil, soya beans and other materials, their import prices are now 30% higher than in August but supply still falls short,” he said.

Cuong said he also paid an extra VND1,000 to buy each dollar on the black market, which was trading the greenback at VND20,500 per dollar. His company spends several million dollars on material imports.

When the extra cost is factored into product selling prices, his company’s goods will become dearer.

The pharmaceutical industry has also suffered from the weakening dong as it heavily depends on materials imported from other countries. It has had to spend more dong to buy dollars to pay for the imports.

Mebipha Co. said it had had to switch to using locally made materials and selling finished products rather than supplying materials only as before.

When the forex rate on the unofficial market rose above VND20,000, transactions with foreign suppliers have come to a virtual stop, the company said. “We are keeping an eye on market movements to decide what to do next.”

Huynh Phu Quoc, import-export director of Truong Thanh Furniture Corp, said his company had shifted to borrowing the dong instead of the dollar for fear that the local currency would further fall. The company spends big on wood import.

“With a bit of luck we import materials and export our products as well, so the forex rate fluctuations have not impacted on us much. Nevertheless, it would be of greater help if the forex market is stable,” he said.

Forex risks drag listed firms’ profits down

2010-10-23T00:06:00.002-07:00

Many listed firms, although having not extracted provisions for forex risks, have pointed to the depreciation of Vietnam dong against other currencies as a key reason behind their poor third-quarter earnings.

In the third quarter this year, Ha Tien No.1 Cement Co. (HT1) suffered losses of VND22.3 billion compared to a profit of VND115 billion in the same period last year. The reason was said to be the higher import clinker price plus the 6% depreciation of dong against the U.S. dollar.

Meanwhile, many companies in the plastics sector have incurred losses as 90% of materials in the sector are imported. Thieu Nien Tien Phong Plastic Co. (NTP) and Tan Tien Plastic Co. (TTP) still have profits in the quarter but their profitability was deeply eroded compared to the same period last year.

Nguyen Dao Thinh, chairman of Vietnam Petroleum Transport Co. (VIP), said that in the first half this year, the company had to extract the provision of VND10 billion for a bank loan of US$60 million and would continue extracting much more by the end of this year given the increasing dollar price.

Pha Lai Thermal Power Co. (PPC) obtained VND120 billion in pre-tax profit in the third quarter this year and VND582 billion in the three quarters ended September. However, provision for forex risks has not yet been deducted from this figure.

The company has taken out a loan of 32.5 billion Japanese yen while the yen price has risen by VND20.18 since late last year, meaning it will have to set aside over VND655 billion by the end of September as provision for the forex risk. That means the company would suffer a loss of VND70 billion.

Dollar continues uptrend on unofficial market

2010-10-22T23:53:00.004-07:00

The U.S. dollar on the black market continued to edge higher on Monday, this time not driven by gold smuggling as often seen in recent fluctuations but by stronger demands, an expert said.

In the previous upward movements of the greenback, analysts were quick to point the accusing finger at gold smugglers who they said collected the dollar to import the yellow metal for a differential gain when the global gold price was lower than on the domestic market. These days, however, global gold has been on a par with the local price.

The dollar selling price on the unofficial market on Monday afternoon hit a high of VND20,450 in HCMC and VND20,470 in Hanoi, an increase of VND50 from last Friday and VND430 compared to 10 days ago.

Meanwhile, gold traded at US$1,364 an ounce in Asian markets on Monday, and given the unofficial rate of VND20,450 to the dollar, the global gold price was VND33.47 million per tael, not much different from the local price of VND33.55 million quoted by SJC. A tael equals to 1.2 troy ounces.

Commenting on the firmer dollar, an executive at a big bank in Vietnam said that “there must be big demand to push the dollar higher.” He remarked that enterprises were seeking to buy the dollar on the unofficial market to make payments after failing to buy it at banks.

The banking expert, who asked not to be named, said traders or manufacturers of essential goods had registered to buy dollars from his bank and those demands had been forwarded to the State Bank of Vietnam for consideration. However, the central bank is considering such registrations on a case-by-case basis, with little dollar volume having been disbursed so far.

“Some enterprises have seen their dollar demand met, but the volume (supplied by the central bank) is inconsiderable,” the source said.

Furthermore, the State Bank of Vietnam has not issued any written pledge to meet dollar needs for the import of essential goods, he added.

The dollar at banks on Monday was unchanged at VND19,500 but no enterprise can buy at that price.

The non-delivery forward rate between the Vietnam dong and the U.S. dollar in Asian markets on Monday was VND20,120 for one-month term and VND21,700 for one-year term, up VND170 from ten days ago.

Banks could lower gold interest rates

2010-10-21T17:05:00.000-07:00

Lenders have responded to the new limitation on gold lending and borrowing, by saying they would consider lowering gold deposit rates.

Truong Van Phuoc, general director of Vietnam Export Import Commercial Bank, told the Daily that his bank would consider decreasing gold deposit interest rates, as the outlet for gold lending had been restricted by Circular 22.

The circular issued by the State Bank of Vietnam that took effect last Friday bans banks from lending gold for trading and speculating. In addition, banks now cannot convert 30% of their gold deposits in local currency funds for making loans like earlier. Therefore, the outlet for gold has been considerably restricted.

Nguyen Thi Kim Xuyen, deputy general director of DongA Commercial Bank, said the bank would keep a close eye on what other banks were doing before revising down its deposit rates for gold.

Currently gold deposit rates at most banks range from 1% to 1.5% per year. In March and April this year when banks were banned from trading gold on foreign exchanges, deposit rates for the yellow metal dipped to 0.1%. However, to meet the capital requirement regulated in Circular 13, banks had to increase rates in gold to 1%-1.5% per year again.

There are concerns that people will rush to withdraw gold from banks if the deposit rates drop, but lenders said it would be unlikely as it was safer for people to keep gold in banks, even at low rates.

“When the gold deposit rate was very low in March and April, people did not withdraw their gold,” Phuoc of Eximbank and Xuyen of DongA Bank said.

Circular 22 placed the gold market under the management of the central bank, so experts expect the market to stabilize, leading to more stability for the foreign exchange market.

Le Tham Duong, head of the Trading Faculty of the HCMC Banking University, said the new circular was aimed at stricter management of banks’ operations, supplementing Circular 13 on safety ratios that took effect in early October.

“Circular 22 also shows the Government’s official view on gold that is just asset for reserve, not an instrument for payment,” Duong added.

Given the possibility of lower deposit rates for gold or even bank fees for gold deposits, people would steer away from gold and switch to holding Vietnam dong for reserve, Duong said. By limiting speculation, the difference between the local and global gold prices would narrow, settling the unofficial dollar price and the foreign exchange market in the long-term view, Duong added.

Although the new circular is going to upset the gold market, it would bring stability to the foreign market in long term, Duong added.

Local gold rose to a new record high late last week on the global price spike. Saigon Jewelry Co. (SJC) quoted its selling price late Saturday at VND33.4 million per tael, increasing VND370,000 per tael from the previous day. A tael equals to 1.2 troy ounces.

Unlike before, the local price has matched the global level since Circular 22 was announced. However, the dollar selling price on the unofficial market strongly rose late last week to VND20,400 on selling.

VinaSecurities in deal with Macquarie

2010-10-18T17:34:00.000-07:00

VinaSecurities and Macquarie Financial Group on Wednesday announced a strategic partnership on such areas as stock market research, capital transactions, mergers and acquisitions and financial consulting service.

Mark Duncan, director of Macquarie Securities Group for Asia, said at a news conference in HCMC that Vietnam was a new investment destination after Macquarie had established a presence in 17 cities of 12 Asian countries.

In Vietnam, the company will support clients who want to invest in global stock markets, Duncan said, adding he was pinning hopes on the long-term growth potential of Vietnam’s securities market.

Talking about the cooperation with Macquarie, Hunt Macnguyen, CEO of VinaSecurities said his stock brokerage could provide better technical support and services for clients.

The assembled reporters at the press conference also heard about a staff reshuffle at VinaSecurities. George Lam, chairman of Macquarie Capital Advisers Vietnam, will serve as chairman of VinaSecurities.

Macquarie Financial Group from Australia provides banking, finance, investment consulting and fund management services. Established in 1969, the group has 70 offices in 28 countries and manages US$326 billion.

VinaSecurities is a subsidiary of VinaCapital Group, founded in 2007, provides financial products and services.

SBV says gold will remain on trade balance

2010-10-17T15:52:00.000-07:00

Central bank Governor Nguyen Van Giau has brushed aside a suggestion by the gold trader association to take gold out of the trade balance, saying the precious metal remained a commodity despite its currency-leaning nature.

The Vietnam Gold Traders Association has suggested that gold as a quasi-money be treated according to its nature, and be taken out of the trade statistics to ensure its movement will not adversely affect the country’s trade deficit.

Giau reasoned that enterprises must use foreign currencies to import gold so it would still affect the national current account.

When it comes to trade deficit, the Government has to consider many factors, not just gold as the main factor, Giau said, rejecting concerns that any surge in gold import would put the country’s trade balance under tenterhooks.

To stabilize the gold market, he said, the central bank would take measures given condition at each point in time, rather than taking gold out of the trade statistics.

Earlier, Giau had told local media that importing gold could increase trade gap but it would not affect much on the total trade balance because there would never be a gold demand big enough to aggravate the trade deficit.

An executive of a big gold company agreed, saying that gold was only considered as a kind of currency if the central bank imported gold to diversify national reserves or to stabilize the market. If banks or companies import gold for purely the bullion trade, or for making jewelry products, then gold must be counted as a commodity and must be listed in the trade balance.

Sharing the view, the general director of a bank said gold was considered as a currency in the world, but in Vietnam, gold was just goods for consumption, not for payment. In addition, Vietnam has yet reserved gold as a kind of currency so it would be reasonable when seeing gold as commodity.

The Vietnam Gold Traders Association, meanwhile, reiterated that if gold was to be taken out of the trade balance, import and export of gold will happen upon normal demand, and this would help local gold price get closer to the world price. To support its suggestion, the association also cited a Government circular in 2009 that considered gold as a special goods as well as a kind of currency.

Central bank told to push down interest rates

2010-10-16T12:32:00.000-07:00

Deputy Prime Minister Nguyen Sinh Hung, speaking at a meeting in Hanoi on Monday with the country’s 63 provinces and cities and 27 leading state-owned companies, said the central bank would have to find ways to lower interest rates.

Interest rates must be cut to acceptable levels, he told the video teleconference intended to deploy the Government’s emergency measures to ensure macro economic stability, control inflation and achieve 6.5% GDP growth.

Hung emphasized the role of state-owned commercial banks in increasing liquidity for the economy battered by high interest rates and said the central bank should adopt flexible interest rate policy to encourage banks to cut rates, said the Government on its website.

The central bank should also maintain the stability of the exchange rate between Vietnamese dong and the U.S. dollar.

Hung noted the Government could consider lowering fuel import tariffs and keeping unchanged coal prices for power stations, and power tariffs for households and producers as key measures to put consumer prices under control.

As for the trade deficit, Hung said, a host of measures permitted by international practices will be taken to accelerate exports and at the same time restrict import spending.

Top ten brokers maintain grip on market

2010-10-14T10:24:00.000-07:00

Top-ten stock brokers in the country still maintain their strong grip with a combined share of over 50% on the market despite tough competition, but some of them changed positions in the list, the Hochiminh Stock Exchange reported.

Of over 100 securities companies operating on the local market, the top ten ones saw their market share shrink little in the first quarter to 50.5% in terms of brokerage fees from the year-ago share of 51.26%.

Securities companies in the list are all popular names compared to 2009. Thang Long Securities Co. ranks first with a market share of 9.37% compared to the year-ago proportion of 9.13%, while Saigon Securities Inc. (SSI) still keeps the second position with the market share of 8.47% compared to 8.26% in 2009.

However, Hochiminh City Securities Co. (HSC) ousted Sacombank Securities Co. (SBS) to grasp the third position with a market share of 7.09% compared to only 5.63% in 2009, while SBS saw its share slide to 5.69% from the previous 7.77%.

Vietcombank Securities Co. has been kicked out from the list and is replaced by VNDirect Securities Co. with a market share of 2.81%, taking the eighth position. The other names are unchanged, namely ACB Securities, FPT Securities, Bao Viet Securities, Kim Eng Securities, and Vietnam International Securities.

In the first quarter this year, only six securities companies served as brokers of bond transactions. Habubank Securities Co. held the biggest market share of nearly 30% in this business sphere.

Central bank likely okays negotiated lending rate soon

2010-10-13T19:43:00.000-07:00

Central bank Governor Nguyen Van Giau met with bankers in Hanoi and HCMC last week to collect their ideas on how to apply negotiated lending rates to short-term loans before officially launching this policy.

At this time, banks can only apply negotiated lending rates for medium and long-term loans while loans of less than 12 months still have the lending rate cap of 12% per year. However, most banks have bypassed the regulation to scale up lending rates for short-term loans higher than 12% per year to secure a profit as their input rate is already around 12% per year.

Banks said if the State Bank of Vietnam allows them to apply negotiated lending rates for all loans, they can actively adjust lending rates depending on risks relating to each project, and many more enterprises can access their loans.

In response to widespread outcries by borrowers relating to high interest rates, the Prime Minister last week instructed the central bank to research and allow credit institutions to apply negotiated rates for all loans, helping to clear capital flow.

Governor Nguyen Van Giau told local media after the meeting with southern bankers here on Friday that the central bank had submitted a plan on applying negotiated lending rates to the Prime Minister and it would be announced soon.

The governor brushed aside worries on a new wave of rate hikes among banks once the new lending rate mechanism is launched, saying some State-owned banks are offering much lower rates than the market average.

“Some State-run banks told me during the meeting they were now lending at rates less than 14% per year,” and some close corporate clients of such banks could even enjoy a preferential rate of 11% per year, he said.

“Big joint-stock lenders will compete with State-owned banks (to attract borrowers) by reducing their lending rates, making the interest rates to fall later,” Giau said.

At this time, lenders are offering loans at rates of about 16%-18% per year to enterprises but few customers accepted such high rates, resulting in stagnant credit growth in the first quarter this year.

Pham Duy Hung, general director of Vietnam Asia Commercial Bank, told the Daily that his bank now lent at 16%-17% per year but few enterprises accepted to borrow money at that rate.

“Therefore, we will reconsider the situation and lower lending rates as well as cut borrowing rates gradually in the coming time,” he said.

The Governor said the actual mobilized fund in the banking system in the first quarter this year increased by 3.8%, much higher than the expected figure of 1.45% earlier.

Meanwhile, the real credit growth in the first three months of the year was 3.34%, higher than the forecast of 2.95% given earlier but still lower than mobilization growth.

According to an article posted on the central bank’s website, Governor Nguyen Van Giau said that the State Bank of Vietnam had adopted measures to cool down the interest rate fever on the market such as providing banks with more longer-term capital and in bigger volumes, refinancing and making currencies swap.

Gold price gap narrower on weak demand

2010-10-12T19:17:00.000-07:00

The gap between local and global gold prices has narrowed considerably as the local price barely increased on Thursday while the global price moved up strongly on Wednesday.

Saigon Jewelry Holding Co. (SJC) early on Thursday quoted its benchmark SJC gold at VND26.19 million per tael, increasing VND60,000 per tael from Wednesday. However, the spot price closed the day down at VND26.13 million per tael. A tael equals to 1.2 troy ounces.

Meanwhile, by 6:00pm on Thursday, the gold price in London was US$1,115.9 an ounce, rising US$2.3 an ounce from the day earlier, having rallied more than US$10 on Wednesday. Therefore, the local gold price is now VND420,000 per tael higher than the global level, compared to the previous difference of some VND600,000 to VND1 million a tael.

Nguyen Cong Tuong, deputy head of sale department of SJC, said that weak purchasing power had kept the local gold price from rising in tandem with global markets.

SJC said its average daily trading volume is around 2,000 taels. Meanwhile, Phu Nhuan Jewelry Co. (PNJ) in the first quarter this year said its turnover declined by 50% from the previous quarter as it sold about 2,000-2,200 taels a day.

Nguyen Thi Cuc, deputy general director of PNJ, said that due to weak demand and small difference between local and global gold prices, bullion traders are refraining from importing gold now given the slim profit when taking into account taxes and fees.

Market stages strong rally on aggressive foreign buying

2010-10-11T14:50:00.000-07:00

Foreign buying gave a big boost to the southern stock market on Thursday, pulling the VN-Index up an impressive 8.94 points, or 1.79%, from the session earlier to 508.18 after two falling sessions in a row.

Investors bid for 95.1 million shares, increasing 7.4% from the previous session, while they offered 74.9 million shares, falling 13.1%. At the end of the day, the market’s total trading volume was 53.7 million shares worth VND2.5 trillion, increasing a quarter in value from the session earlier. A staggering 11.9 million shares worth VND776 billion were transacted via put through, including 6.8 million shares of Vinamilk (VNM) and three million shares of Masan Group (MSN).

Of special note was the heavy buying by foreign investors, who acquired 13.7 million shares worth VND885.4 billion and sold 9.2 million shares worth VND680 billion. Their buying accounted for 35% of the total value.

The market opened a little higher and from the end of the continuous matching phase, it began to move up sharply to the daily high of 508.91 points before closing just slightly below that level. In terms of the VN-Index, PVF, DPM, and HAG made the biggest positive contribution while EIB, SGT, and VPH made the biggest negative contribution.

There were 162 stocks closing higher and 24 others falling, with 26 stocks hitting the ceiling prices and only one dropping to the floor. Blue-chips except Eximbank (EIB) were the biggest booster to help the index beat the 500-point level.

Sacombank (STB) was the most traded stock on the bourse as it rose 2.3% to VND22,200 per share with 2.47 million shares changing hands, followed by Saigon Securities Inc. (SSI), which increased 1.2% to VND43,700 per share with 1.7 million shares traded.

Hochiminh City Securities Co. (HSC) in its daily report said that the markets turned around nicely in decent volumes as a combination of heavy foreign participation in the put-through session and a return of retail investors buoyed sentiment. The market was subject to some rumors from the outset concerning the central bank’s possible micro tweaking to provide additional liquidity in the banking system, it said.

“Today seemed like a knee-jerk movement after a period of selling and we may well see further upside tomorrow or even the next day,” the broker said.

Meanwhile, VinaSecurities in its report commented the rumor which spurred the markets was that the central bank may cut the dong compulsory reserve ratio by as much as 2% to get more money into the markets.

The State Bank of Vietnam then rejected the rumor in local media, which, according to VinaSecurities, means investors will continue to wait for a move to free up liquidity.

“With the current U.S. dollar shortage and low credit growth (2.95% in the first quarter of 2010), the equity market has little gas to run on and any further gains in the market will, undoubtedly, be met by stiff resistance,” it added.

Hanoi’s market also recorded a rebound as the HNX-Index increased 3.27 points, or 2.04%, from the previous session to 163.82. The market’s total trading volume was 21.8 million shares worth VND764.4 billion, falling 2.8% and 1.9% respectively from the session earlier.

There were 130 stocks rising and 96 others falling, including four rising to the ceiling and no stock tumbling to the floor. Contradictorily, foreigners on the northern bourse were net sellers to the tune of VND4.4 billion worth of shares.

HCMC banks’ mobilization improves in March

2010-10-09T05:52:00.002-07:00

The central bank’s HCMC branch has said total mobilization of credit institutions in the city in March is estimated at VND608 trillion, up 0.77% from early this year, while the figure in late February declined 0.45%.

However, considering the mobilization mechanism, there is still little capital in Vietnam dong coming out of the banking system. Vietnam dong mobilization in the year to date has dropped 0.54% while mobilization in foreign currency, mainly the U.S. dollar, has risen 4.19% from early this year.

Nguyen Hoang Minh, deputy director of the central bank’s HCMC branch, said that a fall in Vietnam dong mobilization in the first quarter was mainly because corporations withdrew money from banks for their operations while banking rates were so high.

However, dong mobilization from the public in the first three months this year is still up about 5%, Minh said.

The lending operations of banks in the city seemed not as positive as credit growth. In the year to date, credit growth is estimated at 0.37%, only slightly higher than January-February’s 0.34%. Total outstanding loans in the banking system in the city in the first three months are forecast to total VND562 trillion. However, outstanding loans in Vietnam dong are down 1.81% while U.S. dollar loans are up 7.2%.

According to securities companies, news on the banking system’s liquidity, especially mobilization, would have a strong effect on the stock market. The nearly unchanged market on Monday was mainly because investors were waiting for news of banking mobilization in the first quarter this year, brokers said.

Fiachra Mac Cana, managing director of Hochiminh City Securities Co. (HSC), said on Monday that a recovery in deposit growth within the banking system remained the missing piece of the puzzle.

With nominal average effective interest rates as high as they are (at about 15-18%), corporations prefer to run down cash reserves rather than borrowing more. With the deposit ceiling still locked at 10.5%, retail customers see little or no incentive to add to their bank deposits now. Overall, deposit growth had been weak this year, which helps to explain the equity market trend, Mac Cana added.

HSC sees two possible scenarios for the future. Firstly, the bond yield curve has flattened of late sending clear signals that inflationary expectations are falling. Falling bond yields in the long term may eventually convince retail depositors to be content with lower than market deposit rates and encourage them to return to bank deposits. Secondly, the central bank may give a helping hand by raising the deposit rate ceiling without moving the prime rate. Either would be very positive for stocks, said Mac Cana.

Gold surges to all-time high

2010-10-07T18:42:00.000-07:00

Local gold on Wednesday shot up to a record high of over VND31 million per tael as the yellow metal rose to US$1,310 an ounce in the New York market a day earlier.

Gold made by SJC, the country’s leading gold trading house, closed up at VND31.16 million for buying and VND31.23 million for selling late on Wednesday afternoon, up VND650,000 from the previous day. The selling price briefly touched an all-time high of VND31.35 million a tael – a measurement unit which is equivalent to 37.5 grams.

Gold trade, however, was almost flat. Nguyen Thi Cuc, deputy general director of Phu Nhuan Jewelry Company (PNJ), said gold demand grew strong in the morning but declined in the afternoon.

PNJ sold 750 taels on Wednesday and bought around 400 taels, Cuc said, adding it seemed that individuals did not rush to sell the metal to take profits as 40% of the bought volume came from corporate clients.

The local gold rally is faster than elsewhere in the world, leading to a differential of VND400,000 per tael with tax and fee excluded or VND150,000 after all tax and fee deductions, she said.

Selling by individual gold owners has remained limited while traders are still banned from importing gold, causing a shrinkage of supply on the market, she said, explaining the rally. Moreover, given the continued volatility on global gold markets, local traders tend to hike prices to mitigate price risk.

Due to reduced supply, SJC traded a combined 1,500 taels on Wednesday, down from 4,500 taels a day earlier, said Nguyen Cong Tuong, deputy sales manager of SJC.

He noted a majority of sellers wanted to offset earlier losses and that there were no signs of people rushing to sell to rack up profits so the volume of gold bought from individuals accounted for around one-tenth of that from companies on Wednesday.

Meanwhile, the gold price quotation board at Sacombank Jewelry Company (SBJ) flashed continuously. This firm’s buying price was VND31.18 million and its selling price VND31.28 million.

An SBJ sales executive said the difference between selling and buying prices was big due to their strong volatility.

Seafood exports predicted to reach US$6.5- 6.7 billion by 2015

2010-10-06T18:31:00.000-07:00

Vietnam is looking to achieve total seafood export revenue of US$6.5-6.7 billion by 2015, up US$2 billion from this year, with shrimp and tra fish being key contributors.

This revenue represents a growth rate of 8-10% a year, Tran Thi Dung of the Institute of Seafood Economics and Planning, said at a seminar in HCMC on Tuesday, adding Europe, Japan and the United States would be key markets, accounting for 60-65% of the seafood industry’s export revenue.

To attain an annual export revenue rise of US$400 million, the industry must find ways to enter new markets such as the Middle East and Eastern Europe, Southeast Asia and Asia, especially China, Dung said.

Statistics of the institute show that in the next five years China will have an extra 300 million people living in urban areas, so Chinese demand for seafood will be great.

Luong Le Phuong, deputy minister of agriculture and rural development, said at the seminar that the fishery industry had yet to be an economic spearhead because its contribution to GDP was insignificant, at less than 12%.

“If we have better policies, farmers will develop tiger shrimp and tra fish farming and the fish farming industry will become a key economic driver of many provinces in the Mekong Delta,” Phuong said.

Businesses advised to capitalize on tax incentives

2010-10-05T17:21:00.000-07:00

Companies should find ways to make the most of the tax incentives offered by the Government, Nguyen Thi Cuc, head of the Vietnam Taxation Consulting Association, told a workshop in HCMC on Tuesday.

“The corporate sector should capitalize to the full on the tax incentives that the Government provides,” Cuc said at the “Taxing our way out of global recession” workshop.

The workshop covered topics relating to new provisions on value added tax rebates for specific services and extension of tax payment deadlines. It was organized by the British Association of Chartered Certified Accountants (ACCA) and the Vietnam Taxation Consulting Association.

Concerning personal income tax, the participants voiced concerns about determining and registering personal income tax in line with Official Notice 3473/TCT-TNCN dated September 8, 2010 of the General Department of Taxation.

Particular attention was also given to corporate income tax as well as the important new provisions on customs invoices and invoices made to order.

“Tax policies in a developing country like Vietnam should be simple,” said Chas Roy Chowdhury, head of UK’s ACCA Taxation Department.

Cuc said the latest move of the Government on giving rights of invoice order to enterprises was remarkable, as before only the Ministry of Finance could supply businesses with invoices causing many difficulties.

“This shows the Government is changing the way of administration and facilitating business,” she added.

Chowdhury said, “Companies need to be fully aware that in time of crisis, cash is the most important asset and they need to pursue debts effectively to make sure that customers pay their debts on time.”

Experts also stressed the importance of taxation consultants.

Cuc, who is the former deputy head of the General Department of Taxation, said there weren’t enough taxation consultants with enough know-how working in Vietnam to help the 200,000 small and medium enterprises to deal with the complicated taxation system here.

This is very dangerous if enterprises do not know thoroughly what they have to do and and how they can benefit, she said.

EuroCham confident in outlook, concerned about inflation

2010-10-04T17:22:00.000-07:00

Corporate members of the European Chamber of Commerce (EuroCham) in Vietnam have expressed their strong optimism about the country’s economic outlook, but still keep their eyes wide for a possibly high inflation rate next year.

The EuroCham members underlined their both confidence and predictions about Vietnam’s economy in the first quarterly EuroCham Business Climate Index that EuroCham chairman in Vietnam, Alain Cany, released in HCMC on Wednesday.

Cany said most EuroCham members participating in the survey bore positive business confidence in Vietnam this year and beyond, giving a business climate index of 75 points on a scale from 0 point for the lowest confidence to 100 points for the highest level.

“The business confidence and outlook among European businesses in Vietnam remain extremely positive,” Cany said in his opening speech at the survey release function. He told the Daily that chief executives of more than 200 EuroCham member companies in Vietnam took part in the online survey early this month.

EuroCham executive board member Peter Born said the respondents held very positive views about investment plans next year. He demonstrated that 70% of them listed their outlook as ‘good’ or ‘excellent’, and 68% of surveyed companies planned investment increases in Vietnam.

More EuroCham members look to higher economic growth, as Born said 60% of the respondents expected Vietnam’s gross domestic product to expand by 6-8% in 2011, and this showed an overall confidence in Vietnam’s further economic expansion. Vietnam’s GDP is projected to increase by 6.7% this year.

The survey also indicated steadily or slightly increased recruitment among EuroCham members in Vietnam. When asked about their future employment, 31% of the respondents plan their workforce to rise by up to 20%, while 18% unveil a significant rise of over 20%.

Salary rises loom ahead, as most EuroCham companies forecast the salaries for both skilled and unskilled workers to be up by 5-10% next year. The vast majority is not expecting any kind of labor unrest or strikes in their particular business sector.

EuroCham members are also concerned about increasing inflation and the dong losing its value over both euro and U.S. dollar. Born said half of the surveyed European businesses expected inflation in Vietnam to be 10%, while 39% of them predicted inflation to reach 10-15% in 2011.

Vietnam is striving to curb this year’s consumer price index at 8%, but this revised target is seen almost impossible, as the General Statistics Office put the CPI rise in the January-October period at 7.58% compared to last December and 9.66% to the same period last year.

According to the EuroCham survey, most respondents anticipate a 5-10% depreciation of Vietnam dong against both euro and U.S. dollar.

Born summed up his remarks by saying that the overall response to this first quarterly business climate index survey showed a largely positive sentiment.

Cany said the EuroCham Business Climate Index was aimed to provide a simple mechanism to enable members and the general public to see how they perceive the business climate at any given moment in Vietnam.

The business climate index is an internet-based survey of questionnaires for EuroCham member companies to respond to, especially on current business issues and the area of policies that affect the foreign business community in Vietnam.

Demand for executives rebounds strongly

2010-10-03T18:44:00.000-07:00

The demand of companies for employing executives has grown strongly, especially from the second and third quarters of this year owing to high optimism about Vietnam’s economic growth projection, a Navigos Group executive said.

The recruitment demand for qualified executives in the past quarters of this year surged by 25% or higher compared to the same period last year, said Nguyen Thi Van Anh, managing director of Navigos Group - the leading and largest recruitment service firm in Vietnam.

Anh shared the growth figure with the Daily during the tea break of a client seminar entitled “Accounting/Finance Talent in 2010 – the Foundation for Growth” in HCMC on Thursday. This event was held by Navigos and the Associations of Chartered Certified Accountants (ACCA) for some 200 CEOs, chief financial official (CFO), human resource directors and managers from domestic and multi-national corporations.

“Companies speed up hiring executives because they are more optimistic about Vietnam’s economic growth forecast to reach 6.7% or higher this year, and want to make the best of this strong recovery,” Anh said.

Anh said companies’ demand for executives was very low in late 2008 and the year 2009 when they were hit hard by the impact of global economic turbulence. But the demand has rebounded, particularly from the second quarter of this year.

At the seminar, Anh ranked the top five industries on demand in 2010 as fast moving consumer goods (FMCG), banking, manufacturing, engineering and construction based on a recent research conducted by Navigos. The top five job functions were sales, information technology, accounting/finance, HR and administration, and marketing.

Accounting/finance ranked third among the top five functions with the highest demand for executive positions in the first three quarters of 2010, but Anh stressed companies in Vietnam were paying more attention to professionals in this field, especially CFOs.

“The most recent monetary downturn was witness to the growing influence and control that CFOs and finance leaders have in guiding businesses through troubled times,” Anh said.

Le Thi Hong Len, country manager of ACCA Vietnam, supported Anh’s view.

“Changes in the roles of professional accountants and the finance function itself are partly a consequence of the downturn, and partly an outcome of a growing recognition of the value that the finance function and professional accountants can add to an organization,” she said.

Anh said accounting and finance professionals were no longer regarded as just bookkeepers but also business partners who contribute to divesting and restructuring businesses, developing financial models and analyzing financial forecasts.

The research showed 38% of the demand for accounting/finance employees was for chief accountants, 33% for accountants, 25% for finance managers and directors, and 4% for finance controllers.

As for industry segments, the demand for accounting/finance manpower was highest in the banking/finance sector at 46% followed by 32% in trading/services and 22% in manufacturing/engineering/construction.

Anh raised a concern about demand outstripping supply for accounting/finance in Vietnam, saying that Navigos often had assisted employers in finding CFOs from regional markets.

Anh and other speakers at the seminar called for companies to devise a comprehensive and integrated talent management program as a foundation for business growth. “An appropriate talent management program would help to address HR challenges in the coming year,” she said.

Navigos also found 41% of the over 3,000 people polled in September 2010 identified a poor work environment as the top reason for them to leave a company, above unprofessional line-managers and inadequate remuneration packages with 37% and 22% respectively.

US$40 million more for SME supporting reforms

2010-10-02T13:34:00.000-07:00

The Asian Development Bank (ADB) is supplementing a US$40 million loan to an earlier reform program helping to untangle a knot of red tape for doing business simpler and quicker for small and medium-sized enterprises (SMEs).

ADB’s board of directors on Monday approved the loan for the first phase of the Second Small and Medium-Sized Enterprises Development Program, the bank said in a statement.

The supplementation follows an earlier ADB loan for an initial reform program helping to slash the time needed to register a business, and support a sharp rise in new enterprises and private sector jobs. SMEs make up a large majority of all registered enterprises in Vietnam and most new jobs in the last decade were generated by the sector.

“The priority for the Government of Vietnam is to sustain high economic growth to create productive jobs for around 1.7 million new workers each year, and growing SMEs is an essential part of its development strategy,” Edimon Ginting, senior economist in ADB’s Southeast Asia Department, said in the statement.

Despite the strong progress over the past four years, difficulties in businesses’ accessing medium-term capital as well as some ongoing regulatory issues have slowed down the registration of new SMEs and the expansion of existing ones. Meanwhile, economic overheating and the global financial crisis have created further challenges for local enterprises.

The release of funds for the latest program follows the achievement of key reform milestones by the government. These include steps to develop a comprehensive policy to address constraints to trade and competition, as well as measures to simplify and streamline business procedures, the introduction of a pilot e-customs program in 10 provinces, and the introduction of a web-based national business registration system. The Government has introduced a nationwide credit guarantee system to support commercial banks lending to SMEs.

The latest loan from ADB’s concessional Asian Development Fund has a 24-year term including a grace period of 8 years, with an annual interest charge of 1%, rising to 1.5% for the balance of the term.

A second phase of the program will provide support to continue reforms to improve business competitiveness, and access to finance for SMEs.

The Ministry of Planning and Investment is the executing agency for the full program with the target completion date yet to be finalized.

Behind The Bright Picture

2010-10-01T17:31:00.000-07:00

Vietnam’s GDP continued to grow more rapidly in the third quarter than in the previous two quarters and its macroeconomic performance will probably improve year-on-year. However, hurdles such as inflation, trade deficit and public debt must be coped with in the remaining three months.

According to figures from the Ministry of Planning and Investment, gross domestic product (GDP) growth in the third quarter surpassed that in the first quarter and the second quarter (7.18%, 5.83% and 6.4% respectively). In total, GDP expanded by 6.52% in the first nine months. The figures even exceeded 10% in HCM City and Hanoi, prompting the latter locality to increase its GDP target for this year by 0.5 percentage point.
This ministry ascribes industrial expansion of 13.8% in the first three quarters to stable growth since April (2.67% per month on average). Industrial output may soar by 14% this year, two percentage points higher than expected.
Export earnings, meanwhile, jumped by 23.2% year-on-year and import spending by 22.7%. The trade deficit thus remained fairly stable, US$8.58 billion, equivalent to 16.7% of the export turnover and lower than the target ratio of 20%.

These rosy statistics cannot mask simmering problems, though. In particular, the consumer price index (CPI) leapfrogged by 1.31% in September, far higher than in the previous five months (0.3% per month on average). It is worth noting that the rate of price increase in September in each of the previous nine years also trailed behind this figure. Granted, spending on education often soars at this time of year. However, the surge of 12.02% recorded in September 2010 remains sufficiently shocking. “The education system, which should receive as much support from the Government as possible, is excessively influenced by market forces,” Nguyen Quang A, a high-profile economist, said.

Adverse changes in September pushed up CPI in the first nine months to 6.46%, which makes it harder to keep inflation at 7% in 2010. Higher inflation may spell trouble for the stock market and import in the fourth quarter, when enterprises often purchase large volumes of foreign materials to prepare for production in the new year. Power shortages remain a perennial scourge and, while not at their peak, continue to trail behind demand by 5-10%, just like in the dry season.

Recently, Dao Van Hung, a leader of the Electricity of Vietnam Group (EVN), escorted a group of reporters to Hoa Binh Hydropower Plant to show them the extent of water scarcity there. Unsurprisingly, water paucity has often been used as an excuse for proposing power price hikes. If such requests are not entertained, EVN may turn to power cuts, which are indubitably insidious to the economy. The fact remains, however, that inclement weather is not entirely to blame for Vietnam’s power woes. After all, several thermo-power plant projects have been behind schedule due to obsolete technology and problems in selecting contractors, not to mention EVN’s investment in non-core fields during the heyday of conglomerates.

The damage inflicted by power blackouts in 2010 has not been fully worked out, but it is known that a 1% increase in GDP entails a 2% rise in power consumption. The power shortfall of 5-10% at present has therefore impeded efforts at fostering economic growth and plunged producers, especially exporters, into trouble. To some extent, dwindling foreign investment in Vietnam in the first nine months (down 12.7% year-on-year) and shrinking additional investment in existing projects were attributable to the country’s appalling power supplies, too. Moreover, much to the business community’s dismay, lending interest rates have not fallen substantially.

Transparency and adherence to market principles

In a dialogue with representatives from the World Bank and the International Monetary Fund, Le Duc Thuy, chairman of the National Monetary Supervision Commission, highlighted the importance of transparency and conformity to market principles in nurturing macroeconomic stability and the need to accept short-term instability for the sake of long-term stability. His view generated consensus among many foreign economists.

After all, the lack of transparency has caused Vinashin’s trouble, which has been brewing for years, to spiral out of control and engendered a glaring gap between expectation and reality regarding the trade deficit in 2009. The disparity of US$6.9 billion in the latter case has left Vietnam with no choice but to intervene drastically in the forex market to stabilize exchange rates and maintain macroeconomic stability.

Adherence to market principles and policy coherence are a matter of long-term concerns. Thuy says that no central bank announces in advance the timing and magnitude of forex adjustments, if any. It is also ironical to have a central bank leader insist on forex stability, only to revise the official exchange rate after one week.

Time to phase out stimulus program: World Bank

2010-09-30T15:17:00.000-07:00

With the global economy substantially better now than in 2009, it is almost time to begin gradually phasing out Vietnam’s stimulus package, advised the World Bank (WB) in its latest economic report for East Asia and the Pacific region.

In the East Asia and Pacific Economic Update 2010 titled “Emerging stronger from the crisis”, the global lender said that Vietnam navigated the global financial crisis better than anticipated, given its high export ratio, growing GDP and the economy’s overall openness.

Real GDP grew 5.3% last year, led by a surge in construction due largely to the government’s sizeable stimulus program set between late 2008 and mid-2009.

In addition, a large budget deficit, rapid credit growth and moral suasion on state owned enterprises resulted in a doubling of total investment in 2009, increasing the investment rate to 42.8% of GDP. The state sector accounted for about a third of the total figure.

Regarding the country’s recovery post-crisis, WB economists noted that it has consolidated in recent months, with real GDP growing 6.9% in the last quarter of 2009 year-on-year. Growth of 6% is plausible for the first quarter of 2010.

Meanwhile, inflation shows sign of accelerating. Prices rose 6.5% in 2009 as a whole, down from 19.9% in 2008.

However, on a monthly basis inflation started accelerating in the last quarter of 2009, the WB warned.

The economic report states: “The inflationary pressure is even more visible in asset markets, with the stock market index being on an upward trend for months in a row, and land prices escalating. These developments suggest that the limits of the expansionary policy stance adopted by government since 2008 are being reached”.

In the last quarter of 2009, there was a gradual rebalancing of macroeconomic policy to ensure stability.

The acceleration of inflation, a spike in the domestic price of gold, and a widening gap between the parallel and official exchange rates, made it obvious that the expansionary stance was not sustainable for much longer.

The new policy stance was reflected in a lower target for credit growth in 2010 (25%, as opposed to an actual increase of 37.7% in 2009) and the discontinuation of the short-term interest rate subsidy program. Fiscal adjustment in the order of 2-3 percentage points of GDP, and two smaller devaluations of the Vietnamese dong, in November 2008 and February 2009 also reflected the new policy.

According to the WB, the target for Vietnam’s real GDP growth in 2010 is an easily attainable 6.5%.

However, keeping the inflation rate below 7%, as requested by the National Assembly, will be more challenging, according to the report.

The WB said that for the region’s middle income countries - such as Vietnam, the Philippines, Indonesia, Malaysia and Thailand – the priority is investment in physical and human capital to encourage the development of production and exports.

High interest rate cripples business

2010-09-29T18:31:00.000-07:00

Preventively high interest rates asked by commercial banks are driving corporate borrowers away as enterprises say they cannot afford the borrowing cost as high as 19% a year.

Despite the lending rate is capped at 12% a year by the central bank, lenders are still allowed to apply negotiable rates for medium- and long-term loans and therefore have pushed lending rates to as high as 18% to 19% a year. Ho Huu Hanh, director of the HCMC branch of the State Bank of Vietnam, said many enterprises have bemoaned the high rate.

Huynh Quanh Thanh, general director of Hiep Long Co. Ltd., said his company now could not borrow funds due to the high cost.

“At the current interest rate, only trading firms that have shorter business cycles can borrow. We have decided to relinquish taking out loans when banks raised the rate to 15% a year,” he said.

Thanh remarked that given current business conditions, a more agreeable lending rate should be in the range of 10% to 12% a year.

“The global economic recovery is still in the initial phase with many uncertainties ahead, so enterprises dare not invest much money into business expansion,” he explained.

Tran Quoc Manh, board chairman of Saigon Production-Trading Joint-stock Company, said that the current lending rate at banks is beyond reach of many manufacturing enterprises.

“The current rate of 17%-18% a year on medium and long-term loans is unbearable for enterprises, while short-term funds are being choked off,” he said. Under the central bank’s regulation, the cap of 12% is strictly applied to short-term loans.

“Such a mechanism on interest rates has created a hindrance to enterprises wanting to access bank loans,” he said.

Manh commented that high rates have forced many manufacturing enterprises to put their production projects on hold, while many others cannot boost their acquisition of machinery and equipment to modernize technology. That will result in blunt competitiveness on the global market, he said.

Figures from the central bank’s HCMC branch also prove that enterprises are shunning banks.

In the first quarter of the year, credits disbursed by banks in the city grew a mere 0.37%, showing reluctance on the part of enterprises to take out loans. Credits in HCMC usually account for one-third of the country’s total amount.

Huynh Song Hao, deputy director of Vietcombank HCMC, explained that corporate borrowers dared not take out loans as high interest rates would affect their business efficiency.

Several banks have advised their clients to take out loans in the US dollar to enjoy a lower interest rate despite the risk relating to the foreign exchange rate. Dollar loans carry an annual lending rate of 6% to 7%.

In fact, as a breakdown in the first-quarter credit growth in the city, loans in the greenback rose 7.2% against the previous quarter, while loans in Vietnam dong fell by 1.81%.

Survey finds business optimism high in Vietnam

2010-09-28T15:34:00.000-07:00

Enterprises in Vietnam are the fourth most optimistic as over two-thirds of the respondents expressed their high optimism about the country’s outlook, according to a survey just released by the researcher Grant Thornton Vietnam.

Grant Thornton’s survey shows up to 72% of the respondents expressed their high optimism about Vietnam alongside with Chile, India and Brazil, well compared with emerging markets and global averages of 57% and 24% respectively.

The optimism among businesses in Vietnam surges from 31% last year but still lags behind the 87% observed in the report of Grant Thornton International in 2008, the foreign-owned audit and business advisory services firm said on Wednesday.

Regarding revenue prospects for the next 12 months, the survey finds businesses in Vietnam are most optimistic, with 95% expecting an increase in their earnings compared to an emerging markets average of 59% and a global average of 40% respectively.

Optimism regarding profitability and employment are also the highest, registering 91% and 60% respectively in this year’s survey with more than 7,400 chief executive officers, managing directors and senior executives in medium to large private-held businesses in 36 economies.

Grant Thornton said in the survey that Vietnam had a good supply of semi-skilled, low cost workers while literacy is high, approximately at 96% of the country’s population of some 86 million.

In addition to higher political stability than in many of its neighboring countries, Grant Thornton said the Vietnamese Government had taken steps to make Vietnam attractive to the right investors, and by attempting to cut bureaucracy.

“The Government is trying hard to streamline bureaucracy. An example of this is Project 30: reviewing registration procedures and approvals with the overall aim to reduce the amount of regulation and red tape,” Ken Atkinson, managing partner of Grant Thornton Vietnam, said in the report.

But, Grant Thornton called for investors to make use of local advisers and take time to check the background of potential business partners and understand the business environment.

Grant Thornton noted laws were changing rapidly in Vietnam. The country’s economy has become more open in recent years and increasingly diversified, although agriculture still accounts for more than one-fifth of total output.

The survey ranks Vietnam 16th in the 2010 emerging markets opportunity index after mainland China, India, Russia, Mexico, Brazil, Turkey, Poland, Malaysia, Indonesia, Thailand, Argentina, Hungary, Iran, Chile and South Africa.

The survey indicates financial constraints as the greatest concern to businesses in Vietnam regarding their ability to expand operation as Grant Thornton pointed out in another report released weeks ago.

The latest survey shows the cost of finance and shortages of working capital are of more concern to businesses in Vietnam than anywhere else in the world.

“By means of comparison, financial concerns are cited as major constraints by around 20% more businesses in Vietnam than the emerging markets average. Poignantly, businesses in Vietnam rate their lenders as the fifth least supportive in the world: just 49% class lenders as supportive of their business,” the report says.

Barclays Capital: Trade deficit not as bad as it looks

2010-09-27T16:59:00.000-07:00

Vietnam’s January-March trade deficit is US$3.5 billion compared with a surplus of US$1.5 billion in Q1 of 2009, but it is not as bad as it looked, says Barclays Capital.

The British banking institution Emerging Markets Research comments that at first glance the trade gap looks sizeable, but it should be seen in the context of US$2.5 billion of foreign direct investment (FDI) disbursements and US$1.5 billion of remittances during the quarter.

“On the currency front, the Vietnam dong grey market rate is trading fairly close to the official rate, which suggests forex demand and supply is more in balance. The closure of gold trading floors in the country and the pre-emptive weakening of the currency in February likely helped,” says the bank’s latest report on Vietnam’s economy.
March exports, according to the report, are down 1.6% compared with a 2.4% rise last March.

Exports of precious metals are down 98% given the high base from gold re-exports last year. Crude oil exports, which make up roughly 20% of the total, are forecast to fall 9.6%.
However, the researchers say all other major exports have remained stable, with textiles picking up 8.2%, footwear growing 10% and fisheries expanding 14.5%.

In terms of the other exports, rice shipments have declined 17% but electronics have climbed 41%, furniture has picked up 26% and rubber has risen by 104%, says the report.

“Looking ahead, as the distortion from gold drops out, we expect exports to start rising in line with improved external demand.”
March imports are up 37.6% compared with a 45% drop in Q1 of 2009, and the numbers are supported by a 33% rise in petroleum imports.

According to the report, there is strong demand for cotton and electronics but both are intermediate goods that are used in exports.
Imports of machinery have soared 11% compared with a 42% rise at the start of the year, thus the researchers have also seen steel and fertilizer imports ease.

Barclays Capital economists write in the research report: “Demand for autos and motorbikes slowed substantially, a positive development, in our view. We believe that imports will stabilize given the policy tightening.”

The State Bank of Vietnam has already tightened policy quietly by removing the 12% lending interest rate cap on medium- and long-term loans.
According to newswires, lending interest rates are currently in the range of 18%-19%, which implies an effective tightening of 300-400bp.

However, although the lending cap is 12%, the actual cost to customers is roughly 15% after taking into account extra processing costs.