VietNamNet Bridge - Despite several efforts, six commercial banks have not been able to reduce loans for non-production sectors to 22 per cent by June 30, as required by the State Bank of Viet Nam (SBV).
Representatives of banks said that it was too difficult to ensure the 22 per cent proportion of loans for non-production sectors by June 30. Some banks had offered most of their loans to real estate and securities sectors, many of which are long-term, up to 10 years.

Truong Hoang Luong, general director of the Kien Long Joint Stock Commercial Bank, said his bank had to make every effort to reach the central bank's required rate of non-production loans by June 30.

To have non-production loans account for about 20.3 per cent of the total credit, the HCM City Housing Development Bank (HDBank) cut non-production credit for a long time and focused investment in production, trading agriculture and rural areas, according to its deputy general director Dam The Thai.

Some small banks said they had to make a sharp reduction in provision of personal consumer loans, meaning that they would not expect revenues from non-production credit activities any longer.

The general director of the Orient Commercial Bank (OCB), Trinh Van Tuan, also revealed that his bank had to stop loans for mortgage-backed securities and properties, and even loans for consumer properties, such as buying or repairing residential houses.

Many economic experts, however, were doubtful about the ability for banks to reduce their non-production loans from 30 and 40 per cent, or even 50 per cent of their total credit to 22 per cent, within such a short time.

They said some banks might subvert the regulations so they could reach the central bank's required 22 per cent non-production loan proportion, at least on paper.

To do this, the banks and customers involved in non-production areas would rewrite lending contracts but change the purpose of the loan.

So, money flow to these non-production sectors would continue, and would not be pumped into production sectors as expected.

Many production enterprises do not want to borrow money to expand their businesses since bank lending interest rates are still too high.

The central bank's planned action to penalise commercial banks that fail to meet the 22 per cent non-production loan rate would be to force the banks to raise their compulsory reserve ratios.

However, this penalty may have a side effect since it would contribute to raising deposit interest rates at commercial banks to ensure higher compulsory reserve ratios.

Food provides hotel margin

The food and beverage sector of hotels has been the main source of revenue at many hotels, particularly for high-end hotels.

According to Do Thi Hong Xoan, chairwoman of Viet Nam Hotel Association (VHA), food services contributed between 30 and 40 per cent to several hotels' turnover.

Customers at hotel restaurants are mainly local people, while hotel guests generally eat out, Xoan said.

Representatives of some hotels in HCM City also admitted that in the last two years they had to focus more on the food business because of fewer room stays.

Their turnover from food services now accounts for 50 per cent of the total turnover.

Hong of VHA said that the country has about 13,000 hotels, of which 425 are 3-5 star. On average, each hotel has three types of restaurants including buffet and fine dining. There are a total of 1,275 restaurants at hotels.

To attract more diners, hotel restaurants have organised many food programmes conducted by famous chefs.

John Gardner, an executive of the Caravelle in HCM City, said the hotel often organised between 20 and 30 different food festivals a year.

The hotel's turnover from food services accounted for 35 per cent of its total, Gardner said.

Joerg Becker, chief chef of New World Hotel, also revealed that because of economic difficulties at home and abroad the occupancy rate in the hotel was not as good as it was expected.

But the hotel's food business was rather positive thanks to the increasing number of MICE and local guests.

The hotel often had between six and 10 food programmes per year. In recent years, many Vietnamese people are eating at hotels, Joerg Becker said.

TV ad steams noodle makers

Recently there was a controversy stemming from a TV commercial of a big instant noodle manufacturer.

The commercial said: "If boiled water is poured into the noodle package and the water soon turns a translucent yellow, it proves that the product contains colouring."

By comparing two light and dark yellow noodle packages, the advertisement led viewers to believe that the darkly coloured noodle contained colouring.

According to Tuoi Tre newspaper, "the commercial has allegedly attracted consumers' attention because instant noodles are a product closely attached to most Vietnamese."

Producers have a right to advertise, according to law, but there is dispute about whether the commercial is normal business practice in line with the law or is deceptive.

Some noodle traders said this advert may confuse consumers because noodles that turn this colour in water did not always contain food colouring.

Pham Hoai Huan of the Sai Gon Times Weekly said what matters is whether the advertising content is true.

An advertisement is lawful if its content introduces goods' characteristics, functions and prices and does not have deceptive remarks.

Article 1 of Clause 45 of the Competition Law stipulates that businesses must not advertise by directly comparing their products with counterparts.

In line with this stipulation, advertising with comparisons is unlawful regardless of the truth of the information in the advertisement.

In addition, the competition law also says that the defendant does not have to prove their losses when their products are compared with others. The insistence that losses must be proven is not necessary.

It was also noted that competition laws in other countries may not view advertisements involving comparison as illegal.

However, the Vietnamese legal framework has banned such practices. Meanwhile, our ancestors have a sentence "nhap gia tuy tuc" (when visiting a family, observe its customs).

State firms hold dollars

Though the central bank has ordered State-owned firms to sell most of their foreign currencies to banks, only a few of them have done so.

In its Circular 13 issued on May 31, the central bank instructed State-owned corporations, after deducting the amount of foreign currency needed each month, to sell all dollars to banks in the first seven days of July and the first five days of each subsequent month.

However, most of the companies have seemingly defied the central bank's order.

Although the days for selling the dollars have passed, there has been no surge in the amount of dollars sold to banks in the past week.

The Bank for Investment and Development of Viet Nam (BIDV) is one of the biggest State-owned banks serving many State-owned groups and corporations.

An executive from the bank said State enterprises had a big demand for dollars for business this month, so the amount sold to the banks was sporadic.

The central bank earlier had expected the total amount of dollars sold by State enterprises to banks in July would total US$1.7 billion.

That meant that at least $170 million must have been sold to banks in each of the past several days, he said. However, the amount of dollars sold to banks was much lower than expected.

The demand for dollars among enterprises had risen slowly, but that is not enough to create pressure on the forex rate.

Source: VNS