WB: Vietnam economy grows beneath potential

The World Bank (WB) projected Vietnam’s economy would expand at a lower-than-expected pace and beneath its potential.

Speaking at a press briefing in Hanoi City on October 6 where the WB launched the East Asia Economic Update report, the international lending institution estimated the nation’s gross domestic product (GDP) growth at around 5.4% at the end of this year and possibly not more than 5.5% before 2016.

The WB’s projections were lower than the targets set by the Government.

Nguyen Van Nen, Minister and Chairman of the Government Office, told a regular press conference in the capital late last month said the local economy posted relatively stable growth between January and September.

Though no breakthroughs have been made so far, the GDP growth of 5.8% is obtainable this year, Nen said. Some cabinet members even expected a GDP growth rate of 5.9%, citing the Government’s pro-business measures.

At on October 6’s press briefing, the WB said the slowed GDP growth rate is the consequences of weak domestic demand. In the long term, economic growth would be driven by various factors such as the restructuring of State-owned enterprises and banks, policy-related issues that are hindering private investments, shortages of skilled workers, and a big gap between infrastructure and logistics services.

Sandeep Mahajan, WB lead economist for Vietnam, said the nation’s GDP growth is supported by foreign direct investment disbursements, the performance of foreign-invested enterprises, and 15% export growth this year despite weak domestic investments and low credit growth at banks.

Meanwhile, industrial production especially from the domestic sector remains a disadvantage. Low confidence and consumption in the domestic sector continue to dent the country’s economic growth, Mahajan said.

According to the WB, macro-economic stability can be strengthened further this year on the back of low inflation. Low GDP growth has facilitated monetary policy easing but credit is still obstructed by the balance sheets of banks and subdued domestic demand.

From January to July, around 37,600 local enterprises shut down or suspended operations, rising by 10% year-on-year. Besides, retail growth, an index measuring the buying power of the private sector, fell to 5.7% in June, the WB said.

The ratio of domestic private investment to GDP stood at 10.7% in the first quarter of this year, lower than 13.9% in 2010.

Duc Khai to complete 1,080 resettlement apartments this month

Duc Khai Corp. is expected to complete 1,080 resettlement apartments in HCMC’s District 2 later this month and these apartments will then be allocated to the households affected by the development of Thu Thiem New Urban Area.

Nguyen The Minh, deputy head of the Investment and Construction Authority of Thu Thiem New Urban Area (Thu Thiem ICA), told the Daily last week when Minister of Construction Trinh Dinh Dung made an inspection trip to the project.

Thu Thiem ICA has been authorized by the city government to sign a contract to buy the 1,080 apartments built by Duc Khai Corp on an area of 38.4 hectares in Binh Khanh Ward.

The corporation is now giving its final touches to the apartments before handing over them to the authority this month. Later, the authorities of District 2 will get these condo units for handing over to the households.

When the households will receive the new apartments will depend on the lease and purchase agreements signed by them and District 2. In some special cases, each household can get two apartments but their prices have not been publicized.

If the households are not satisfied with the new apartments constructed by Duc Khai Corp., they will be allowed to choose others built for the city’s resettlement housing program comprising of 12,500 condo units for the households affected by the development of Thu Thiem New Urban Area.

London firms keen on infrastructure projects

Alderman Fiona Woolf, Lord Mayor of the City of London, said companies from London are interested in transport infrastructure and healthcare projects in HCMC.

Woolf was speaking at a meeting with HCMC chairman Le Hoang Quan on Monday as part of her visit to Vietnam from October 5 to 7. The visit is aimed to boost trade and economic ties between Vietnam and the UK.

London’s enterprises are looking for opportunities in road projects and the development of Thu Thiem New Urban Area in District 2. Of the infrastructure developments, they have paid much attention to the city’s subway projects, Woolf said.

The UK and London have experiences in metro construction. Around 92% of Londoners use public transport, so UK firms can give consulting to transport projects in the city.

Notably, companies from London are interested in Metro Line No. 5 in the city, she added.

London could help the city and Vietnamese businesses access long-term loans and international know-how for infrastructure projects and public-private partnership (PPP) model.

British firms are also strong in project management. Besides, institutes and educational institutions in London can support HCMC in manpower training for property evaluation and finance.

In the coming time, the city will send a delegation to the UK to learn about PPP project development.

HCMC Chairman Quan said traffic infrastructure projects including metro lines are among the top priorities of the city as they will help ease traffic congestion. Therefore, the city needs a huge amount of capital, an estimated US$60 billion or more, for transport development from now to 2020.

The Lord Mayor is scheduled to meet high-ranking Vietnamese officials and policymakers during her trip to the country.

New tours connecting Phu Quoc and Singapore

Tourists in HCMC next month will have the opportunity to buy new tours that take them to beautiful beaches on Phu Quoc Island off mainland Kien Giang Province and then Singapore for shopping.

The new tours connecting the two islands are arranged by Saigontourist Travel Service Company after the national carrier Vietnam Airlines launches a new international service connecting Phu Quoc and Singapore next month.

Saigontourist said it has collaborated with the national air carrier and local partners to design these tours comprising a five-day tour taking in HCMC, Phu Quoc and Singapore, and a four-day tour to the neighboring country from Phu Quoc.

The former, which costs VND12.5 million and kicks off on November 6, will help tourists enjoy a new experience with both swimming and shopping. Meanwhile, the latter, which is priced at VND10.5 million and first departs on November 6, will bring convenience to travelers thanks to its direct flight without a stopover in HCMC.

Besides, the travel firm has announced new services for its customers in Phu Quoc, such as visiting and swimming at Sao beach, and discovering Vinpearl Land Amusement Park and the aquarium in Vinpearl Phu Quoc.

Saigontourist stated that it will offer a discount of VND500,000 on the first ten customers booking these tours by calling 0916 466 268 or visiting www.dulichthu-dong.com.

VND24.5 trillion needed for Trung Luong-Can Tho expressway

The cost for building Trung Luong-Can Tho Expressway linking Tien Giang Province and Can Tho City in the Mekong Delta is expected at VND24.5 trillion, or over US$1.15 billion, said Cuu Long Corporation for Investment, Development and Project Management of Infrastructure.

In its report recently sent to the Ministry of Transport, the company, shortly known as Cuu Long CIPM, said the expressway project will include two sections.

The company suggested spending more than VND17 trillion on stage 1A of the first section, including the 54.3-kilometer Trung Luong-My Thuan Expressway and a 6-km approach road.

According to its plan, Trung Luong-My Thuan expressway section will have four lanes, including two lanes for vehicles to move at the highest speed of 80 kilometers per hour and the other two allowing for vehicular speed of 40 km per hour without a median strip in between.

Earlier, the Bank for Investment and Development of Vietnam (BIDV) was assigned as investor of the Trung Luong-My Thuan section. The bank returned the project after two years due to financial difficulties, and Cuu Long CIPM was selected to replace it.

The site clearance process was finished on this section in 2009, and the Government Office is collecting opinions from the ministries of planning-investment and finance on the project progress.

Cuu Long CIPM also suggested investing in the 1A stage of the My Thuan-Can Tho expressway section, comprising 32.2 km of expressway and 7.82 km of approach road, with a total investment of VND7.5 trillion.

This section will include the 4-km My Thuan 2 Bridge, which is around 400 meters away from the current My Thuan Bridge. The company is calling for investment in this bridge project so that it can be started at the same time with the My Thuan-Can Tho expressway project.

Trung Luong-My Thuan and My Thuan-Can Tho expressway sections are two among three parts of the HCMC-Can Tho Expressway. The other section is 40-km HCMC-Trung Luong Expressway which has been put into use since February 2010.

Nam Dinh, Japan’s Ibaraki boost industrial, agricultural ties

Chairman of the People’s Committee of northern Nam Dinh province Doan Hong Phong had an October 7 working session with Mayor of Japan’s Ibaraki prefecture Hashimoto Masaru, during which they discussed how to step up cooperation in agriculture and industry.

Phong proposed that Ibaraki transfer technology in selecting plant varieties and breeds as well as in processing and preserving farm produce, and speed up high-tech agricultural projects in Y Yen district.

He also urged the prefecture to encourage its businesses to invest in machinery manufacturing, pharmaceuticals, agricultural and aquatic product processing, and electronics in the locality.

Nam Dinh is ready to reserve one to two industrial zones with favourable positions for businesses from Japan in general and Ibaraki prefecture in particular, he added.

According to the provincial leader, Nam Dinh is calling for coordination from Ibaraki scientists and research institutes in studying solutions to improve the quality of farming land and respond to climate change. The two sides should jointly implement projects to restore and develop lacquer, silk and wood production in the locality.

He also asked the Japanese side to support Nam Dinh in training of high-quality human resources.

For his part, Hashimoto Masaru said that agriculture is still a priority in cooperation between the two localities.

During this visit, the prefecture will consider collaboration with several Vietnamese localities, including Nam Dinh in the north and Dong Thap in the south, he added.

UK offers support for infrastructure

The UK wants to support Vietnamese businesses in accessing sources of capital to invest in infrastructure development projects, Fiona Woolf, the lord mayor of London, said at a press conference held on Monday in HCM City.

Woolf, who was on a three-day visit (Oct 5-7) to Viet Nam, was accompanied by a delegation of leading British businesses, who met with politicians, policymakers and business professionals in Viet Nam to exchange opinions on how to improve sustainable growth in both countries.

Key areas of discussion included opportunities for collaboration arising from foreign direct investment on infrastructure projects, professional and vocational skills training, intellectual capital, Public-Private Partnership projects, and the proposed EU-Viet Nam free trade agreement.

Woolf said: "The UK offers access to a uniquely international pool of capital, talent and expertise, and UK firms possess a whole life-cycle approach to project management. Closer partnership with the City of London can help Vietnamese companies unlock the long-term financing it needs to fund investment in key areas like infrastructure and Public Private Partnership projects."

She said the UK supported Viet Nam's financial reforms and the free trade agreement currently under negotiations.

"The UK and Viet Nam already have a strong economic relationship, but there's huge potential to take it into a new stage. I hope this visit will show why the UK should be seen as the partner of choice on trade and investment," she added.

Prior to her visit to Viet Nam, Woolf described the country as "a high-growth market with significant business opportunities across a range of sectors," adding that UK firms were keen to deepen their ties with the Vietnamese business community.

Viet Nam has been listed as one of 20 high-growth markets by UK Trade & Investment, given its particularly strong potential for British businesses to work with local companies.

Ariston Thermo opens training academy

Italian heating and appliance manufacturer Ariston Thermo Group opened Ariston Academy at its manufacturing plant in Bac Ninh Province's Tien Son Industrial Park yesterday.

As the first in-house training facility established in Viet Nam, the academy aims to promote the quality of human resources in the country's heating industry.

The first training course will include 150 trainees from Ariston distributors and supermarkets.

Ariston Thermo Group opened its second-largest Asian production facility in Bac Ninh Province in April. The nearly US$18 million plant employs about 300 people and can produce up to 1,000,000 electric water heaters per year.

HCMC housing market shows clear signs of recovery

Residential real estate sales are pushing Ho Chi Minh City into seller’s market territory with an increase in the number of properties changing hands in the last year ballooning by 85%, according to property company Savills Vietnam.

In the third quarter of the year alone, the number of real estate closings jumped 29% against the second quarter, with the total number of sales estimated at 3,280, according to the nation’s largest real estate agency.

A recent Savills research report indicated that 10 residential real estate projects in the city are offering 4,600 single family residential units for sale, 19% higher than Q2 and up 103% since the beginning of the year.  

The research report forecasts that during the period 2015-2017, the real estate market will continue to rebound with over 95 projects offering 70,100 single family residential units for sale.

Vietnam rice exports to rise by 6%: FAO

The United Nations Food and Agriculture Organisation (FAO) has predicted that Vietnam's rice exports would increase by six per cent year-on-year to 6.9 million tonnes in 2014.

The organisation attributed the increase to the country's rising paddy yield and the rising demand of Asian markets, including Indonesia, Malaysia, China and the Philippines.

FAO estimated Vietnam's paddy yield this year to hit a record high of 44.5 million tonnes, equivalent to 27.8 million tonnes of rice that represent a year-on-year increase of 740,000 tonnes.

The country is in the summer-spring and autumn-winter harvest seasons, and FAO estimated paddy yields during these seasons would inch down against that of the same period last year, following the Government decision to use some rice-producing areas for the cultivation of other crops.

The Ministry of Agriculture and Rural Development (MARD) reported that Vietnamese rice exports in the past nine months reached 5.02 million tonnes worth US$2.3 billion.

In September alone, the nation exported 524,000 tonnes of rice worth US$249 million.

Wholesale rice prices in the domestic market continuously increased for three consecutive months, including last month because of rising import demand, especially from China.

A tonne of rice with 25-per cent broken rice grain content was priced at US$400, a 21-per cent increase against that of September last year.

China remained the largest market for Vietnamese rice, making up 33.24 per cent of market share, followed by the Philippines at 22.71 per cent, Malaysia at 6.1 per cent, Ghana at 5.37 per cent and Singapore at 3.26 per cent.

The United States Department of Agriculture predicted that Vietnam's rice yield this year would reach 28 million tonnes, equivalent to 45 million tonnes of paddy, and that its exports would reach 6.7 million tonnes.

Local firms grasp opportunity to boost exports to Austria

Trade between Vietnam and Austria has been rapidly expanding over recent years, largely as a result of improved market analysis and research efforts targeting specific market segments, helping raise competitiveness and profitability.

As a case in point, in the first week of October, a delegation of 12 representatives from Austrian businesses made a fact-finding tour of Ho Chi Minh City seeking partners and cooperation opportunities.

They specifically limited the focus of their tour to a relatively small number of market segments in areas for which they possess export strengths including dietary supplements, waste treatment, banking and finance.

Meanwhile, they also gathered information on Vietnamese export strengths with an eye to identifying mutually beneficial trade and cooperation opportunities.

The General Department of Vietnam Customs reports that Vietnam mainly imports wooden furniture, plastic materials, machinery and medicine from Austria. The country’s key export items to the European nation include footwear, garment and apparels, electronic components and bags.

In the seven months leading up to August, exports to Austria jumped 16.61% to US$1.35 billion.  Electronic telephones – one of the biggest hard currency earners – grossed US$1.12 billion of revenue, representing an increase 16.72% year-on-year, and accounting for 83% of the total export value.

There is a tremendous potential and opportunity for Vietnamese businesses to boost exports to Austria, says Stephan Spazier, commercial attaché of the Austrian Embassy in Vietnam.

Austria has high demand for importing garments, wood products, food, spices, and electronic components which are also the country’s key export products, Spazier says, adding that this opens up a great number of opportunities for businesses from two countries to strengthen bilateral trade cooperation and raise their export earnings.

Austria is also eager and willing to share experience with Vietnam in potential fields, including energy, manufacturing industry, environment and health care, Spazier says.

Vice Chairman of the Vietnam Chamber of Commerce and Industry (VCCI) Nguyen The Hung in turn says bilateral trade relations between the two countries in recent years has witnessed significant expansion.

The nation’s exports to Austria have been robust showing steady incremental grown hitting a record high of US$461.53 million in 2011, a whopping five-year rise of 220.46% over the figure from 2005.

Two-way trade turnover just reached US$139.8 million in 2005, of which Vietnamese exports were US$88.9 million. It skyrocketed to US$1.9 billion in 2013, making Austria one of the top eight importers of Vietnamese products in the EU.

Leading market analysts say Austria is a highly lucrative market with a history of stable economic growth. Its Government is proactive and progressive in implementing policies oriented to the Asian market. Local businesses should reach out and grasp the opportunities the Austrian market offers to promote long-term and sustainable exports.

Russia rejects Vietnamese frozen basa fish

Russia has blocked an unprecedented 25 tonnes of imported Vietnamese frozen basa fish, announced the Russian Federal Service for Veterinary and Phytosanitary Control (Rosselkhoznadzor) on October 6.

The fish originated from the DL 308 Factory of Hung Vuong Corporation (HV Corp.) and were shipped to St. Petersburg, Russia at the time when Rosselkhoznadzor is temporarily restricting the import of all products supplied by HV Corp.

Earlier, Moscow Court supported the Federal Antimonopoly Service of Russia (FAS)’s stance on preventing market manipulation of Vietnamese basa fish supplies. Dishonest companies will be fined more than 30 million ruble.

CBRE report hails home sales in south as confidence rises

Vietnam’s southern economic hub Ho Chi Minh City has seen an uptrend in residential sales in the first nine months of this year.

According to CBRE’s latest report, as sales improve and buyers’ confidence increases, developers have become more and more confident launching their products.

Well-attended launches continued to enjoy high sales results in the third quarter, although the number of new launches went down 8.8 per cent due to Ghost Month (from July to August).

CBRE noted that with 3,104 units launched, supply in the third quarter went up 95.8 per cent compared to the same period last year.

Thanks to improving market conditions, prices on both the primary and secondary markets in the third quarter started to show tentative improvement against the second. Primary prices increased from 1 to 4 per cent compared to the last quarter and 1.2 to 5.4 per cent compared to the same period last year across all segments.

The most noticeable improvement was in District 2, thanks to infrastructure improvements such as Metroline No.1.

On another note, the increase in tenants looking for buy-to-let options bolstered high-end apartment prices.

However, in general the high-end segment showed a more positive picture than the other segments as resellers easily found tenants confident in capital gains.

According to Duong Thuy Dung, head of CBRE’s Research and Consulting Department, sales volumes continued to rise with deposits put down on 50-70 per cent of units. Preliminary figures showed that sales volume increased by 8.6 per cent on-quarter and 94.8 per cent on-year to approximately 3,300 units sold.

While the affordable segment continued to rise, the number of units sold in the high-end segment as a whole was relatively modest.

Buyers at high-end developments comprised a high proportion of either buy-to-let or capital gain investors that are often superstitious about selling or buying houses during Ghost Month. In contrast, end-users, and especially those on a limited budget, buy a house at whatever point they are able to access financing.

“It has been a long seven year slog with disappointments and broken promises on house delivery. However, recent positive sales results and busy launch events suggest that we have may arrived at a point where the worst of the market is behind us,” Dung added.

Inflation rate stands around 3-4% in 2014

The National Financial Supervisory Commission (NFSC) forecasted that this year's inflation only stands around 3-4%.

As of September this year, the inflation continued to remain at a low level within the recent two years. The education service increasing by 7.17% led to the highest inflation over the past seven months.

In September, the inflation rose by 2.25% compared to the last month of 2013 and a year-on-year increase of 3.12%.

The Gross Domestic Product (GDP) is expected to grow at 5.8% in 2014.

Over the past nine months of 2014, the Industrial Production Index saw an increase of 6.4% in comparison with the same period last year, of which the processing and manufacturing industry was up 8.2% and the electricity production and distribution up 11.2%.

The export and import turnover increased 13.2% and 12.1%, respectively, resulting in a trade surplus of US$1 billion, accounting for 0.9% of the export turnover.

Viet Nam's total retail sales and service revenues are estimated to rise 6.2% in the nine-month period.

Transport Ministry finishes equitization of ten corporations

The Ministry of Transport said that equitization of ten state-own enterprises had been done in September as per schedule and the process was on schedule to other enterprises.

After being equalized, Civil Engineering Construction Corporation Companies No.4 and No.1 and Transport Engineering Design Company have better operated, increasing income for their workers.

The equitization results in 7,737 redundancies from Vietnam National Shipping Lines and the Shipbuilding Industry Corporation.

In the first nine months, the ministry ordered relevant agencies to withdraw VND375 billion (US$17.70 million) from 23 companies belonging to six corporations.

The ministry said it would continue instructing preparation for equitization of the rest 21 enterprises by the end of this year, striving to reduce the number of state-own companies to 16 by 2015.

New decree reduces 88 tax payment hours

Tax declaration time for businesses will reduce 88 hours per year as the Prime Minister has issued Decree 91, simplifying procedures on tax management, business income tax, value added tax and personal income tax.

According to Minister of Finance Dinh Tien Dung, value added tax declaration will reduce from 12 times every year to only four times per year as the new decree permits enterprises to do it quarterly instead of monthly.

The regulation will be applied to enterprises with annual revenue of VND50 billion and lower in the previous year.

Similarly, businesses will declare business income tax annually in stead of quarterly, cutting the declaration time from five to only one per year.

After the decree 91 takes effect on November 15, tax payment time will drop 88.36 hours per year. Of these, value added tax takes less 41.36 hours and business income tax reduces 47 hours.

Earlier, the Ministry of Finance has released Circular 119, modifying seven tax circulars to facilitate tax payment for businesses. The circular has taken effect since September 1 and reduced 201.5 hours spent on tax procedures every year.

Two shipping routes opened to ease pressure on roads

Two new seamless coastal shipping routes, connecting central Quang Binh province and southern Kien Giang province, officially opened on October 5.

Deputy Director of Vietnam Inland Waterways Administration (VIWA), Tran Van Tho, said that three months after the Ministry of Transport (MoT) put the coastal shipping route from northern Quang Ninh province to Quang Binh into operation, the sea route helped ease pressures on road transport, in addition to reducing traffic accidents, protecting transportation infrastructure, and reducing freight costs.

For that reason, the MoT has decided launch two sea routes from Quang Binh to Kien Giang (Quang Binh-Binh Thuan and Binh Thuan-Kien Giang routes) with a total length of 1,560km, Tho revealed.

Surveys by the VIWA showed that there was a large demand for freight transport on these routes. Annual freight volumes transported among the Mekong Delta provinces alone was estimated at 51.5 million tonnes per year. Meanwhile in Da Nang, transport demand for goods such as petroleum, clinker, fertilisers, wood, and steel reached more than 400,000 tonnes a year.

Speaking at the launch, Deputy Minister of Transport, Nguyen Van Cong, said that coastal shipping routes were among solutions to enhance transportation methods in a bid to reduce pressure on road transport and inventories at ports.

HCMC greets new Samsung complex

Samsung Electronics’ investment story in Vietnam has begun a new chapter when the company last week received an investment certificate for the firm’s new $1.4 billion electronics facility in Ho Chi Minh City.

The new project, named Samsung CE Complex, will feature research, development, and production of hi-tech consumer electronics products and equipment, the South Korea electronics firm announced.

Located at the Saigon Hi-tech Park, the project will be divided into two stages, the first will focus on production of consumer electronics such as TVs and LEDs while the second will start production of other consumer electronics products.

Samsung has announced that the construction of the project will commence in January 2015 and operations will start in the first quarter of 2016.

 “This is Samsung Electronics’ newest project in Vietnam and also a continuation of our Samsung Vina project, but with a wider scope aimed at the export market in the region and across the world,” a Samsung announcement read.

The new investment will increase Samsung Electronics’ total committed capital in the country to nearly $10 billion, with three manufacturing bases in the northern provinces of Bac Ninh and Thai Nguyen, and Ho Chi Minh City.

The project is also a reaffirmation of the company’s announcement that Vietnam would become its global production base.

 “Receiving the investment certificate for the Samsung CE Complex is a new milestone on Samsung’s Vietnam journey. This is a remarkable country that is now on the global map of manufacturing and particularly the supply of electronics and mobiles,” the Samsung statement added.

Along with the Bac Ninh SEV and Samsung Hi-tech Thai Nguyen SEVT complexes, the new project will bring Vietnam further into Samsung’s global supply chain.

Samsung Electronics made its first investment in Vietnam in 1995 with its Samsung Vina Electronics factory in Ho Chi Minh City. The factory produces consumer and household electronics. In 2008 Samsung invested in its second project in the country, Samsung SEV Bac Ninh, producing primarily mobile phones. This project saw an initial investment of $670 million but is now capitalised at $2.5 billion after several expansions. Samsung then put $3.2 billion into its complex in Thai Nguyen, which has been in operation since March 2014.

As the result of its expansion in Vietnam, Samsung is now the largest exporter in the country. In 2013 Samsung SEV Bac Ninh alone reported more than $20 billion in the export turnover, accounting for 18 per cent of Vietnam’s total export turnover. This helped Vietnam reach a trade surplus for the first time in around 20 years.

The South Korean group’s revenues in Vietnam are expected to further shoot upwards when the Thai Nguyen factory reaches full production capacity and the Ho Chi Minh City plant begins operating.

Interest rate risks hide behind home loans in Vietnam

Many banks are offering credit packages that allow homebuyers to borrow up to 70 percent of the value of the apartment they want to purchase, but there are risks behind these seemingly attractive lending plans.

When he was told about one such credit package, Le Van Lam eagerly visited several banks to learn more about a home loan that could help him buy a VND1.4 billion (US$65,895) apartment in Tan Phu District, Ho Chi Minh City.

Lam, who works for a construction material firm in the city, said he and his wife needed to borrow VND900 million ($42,361), as they had saved up VND500 million ($23,534).

Employees at one of the banks told Lam that he had three loan plans to choose from, all of which have a 15-year term.

The first plan offers a zero interest rate for the first month of the loan term, and two percent a year for the next 11 months. Starting from the second year, the lending interest will be the 13-month deposit interest rate at that time, plus a fixed 4 percent a year.

Under another plan, the loan would have a fixed 8 percent a year interest rate for the first six months, and then 12 percent a year for the next six months. The interest rate for the second year would be the 13-month deposit interest rate at that time, plus a fixed 5 percent a year.

This means if the deposit interest rate for a 13-month saving is 6.6 percent, the lending interest Lam would pay in the second year of his prospective loan would be 10.6 percent a year under the first plan, and 11.6 percent in the second one.

“What worried me was that we do not know how the deposit interest rates would change in the next 15 years,” Lam said.

The low interest rates of seven or eight percent are only applied for a short period of time, and it is dangerous that there are no fixed interest from that point on, he added.

Lam eventually decided to delay his plan to buy an apartment, fearing that he may “incur bankruptcy and lose the apartment” with such home loans.

Taking out bank loans and amortizing the debt is the most feasible solution for people with decent income to be able to afford an apartment in Ho Chi Minh City.

But for Vo Ho Thuc Doan, choosing this solution means living under pressure for 15 years, thanks to the burden of clearing a loan.

The 32-year-old white-collar worker obtained a VND620 million ($29,182) home loan to buy a VND920 million ($43,302) apartment.

Since last December, Doan has had to pay around VND11 million ($518) a month to clear her debt.

“I have to set aside this amount every month, no matter what happens,” she said.

“As life is full of things we don’t expect, there were months when the payment date was near while I did not have enough money.”

Nguyen Khoa, a public servant in Ho Chi Minh City, was not able to withstand such pressure.

In 2010, Khoa had to put his apartment up for sale so he could repay the home loan he had borrowed for the property.

While he was able to pay VND10 million ($471) a month to clear the debt at 12 percent a year in 2008, the interest rate rose to 18 percent a year in 2010, thus doubling the monthly amount he had to pay.

“We had to sell our house, as we could not afford VND20 million ($942) a month,” he said.

Government proposes using state budget to settle SOEs’ bad debts

The government has sent a proposal to the National Assembly Standing Committee on using funds from the state budget to settle the bad debt of state-owned enterprises (SOEs) despite earlier statements to the contrary.

The Ministry of Planning and Investment submitted the proposal to the National Assembly Standing Committee on behalf of the government in a report on the national economic restructure.

According to a report released by the National Financial Supervisory Commission late in 2013, by the end of 2012, the bad bad debt held by SOEs, excluding Vietnam Shipbuilding Industry Group (Vinashin), now known as the Shipbuilding Industry Corporation (SBIC), accounted for 11.8% of Vietnam's total bad debt.

Vietnam still has a high rate of public debt and high state budget deficit, making the possibility of using state funds to settle SOE bad debt more difficult.

Meanwhile, at earlier National Assembly sessions, the government said that state funds would not be used for dealing with the bad debts held by SOEs. So, the government approved the launch of Vietnam Asset Management Company (VAMC) as a solution to the problem.

Recently, at a NA Q&A session, Nguyen Van Binh, governor of State Bank of Vietnam (SBV) also affirmed that VAMC will not use the state budget for the bad debt settlement.

The SBV has recommended that the government raise the registered capital of VAMC to VND2 trillion (USD95.23 million) from the current VND500 billion (USD23.8 million).

Binh added that the VAMC has bought VND800 billion (USD38.1 million) of bad debts compared to its registered capital of just VND500 billion, showing the financial capacity of the of the firm to be weak.

The governor noted that basically the government agreed on raising the registered capital of VMAC to VND2 trillion next year.

SOEs in city divest VND4.7 trillion

Fourteen State-owned enterprises (SOEs) in HCMC are expected to divest a total of nearly VND4.74 trillion in the 2014-2015 period from non-core operations.

Over VND1.55 trillion will be divested this year while next year’s amount will be some VND3.18 trillion, according to an updated report by the HCMC government on restructuring of public investments, SOEs and the banking system in the city.

The divestment progress of SOEs in HCMC will be speeded up this year and next and enterprises will focus on withdrawing their capital previously poured in the sectors of banking, stock, insurance, real estate and investment funds.

According to the city’s SOEs restructuring plan approved by the Prime Minister two years ago, the city will maintain 12 enterprises wholly owned by the State and let 77 others go public. There will be 31 enterprises turning shareholder-owned in the 2013-2015 period and the number of enterprises to be equitized after 2015 will be 48.

HCMC expects to see 15 enterprises finishing equitization this year, with two units having completed their schemes so far. The city government will give approval for the equitization plans of 11 enterprises this month.

According to the city government, the equitization next year will be more advantageous as SOEs have prepared themselves better than those undergoing equitization this year.

Revenues of SOEs are not stable and tend to decline sharply. SOEs generated VND157.37 trillion in revenue in 2011, VND122.51 trillion in 2012 and VND84.74 trillion last year.

More incentives for SMEs in supporting industries

A new decree on developing supporting industries will help small and medium enterprises (SMEs) easily approach incentives, an official said at a seminar in HCMC last week.

Truong Thanh Hoai, deputy head of the Heavy Industry Department under the Ministry of Industry and Trade, told the seminar that though the Government issued two decisions effective three years ago to develop supporting industries, enterprises have yet to get access to incentives.

Truong Thi Chi Binh at the Industrial Policy and Strategy Institute under the ministry said Decision 12 of the Government caused a big disappointment for firms as the incentives in the decision were the same as provided for in prevailing policies and did not show clearly the list of priority products.

Besides, the decision regulates that to enjoy incentives, projects must be approved by the Prime Minister. As such, there was only one foreign firm enjoying the incentives after three years implementing the decision.

In drafting the new decree, according to Hoai, it is suggested that the competence in evaluating and approving projects be transferred from the central Government to authorities in localities.

In addition, Hoai noted that the support for textile-garment enterprises should focus on non-financial assistance, such as technology transfer and environmental costs, instead of financial leverage as before.

The new decree is expected to be submitted to the Government next month for issuance later this year.

The decree will add more incentives related to corporate income tax, and regulations on constructing zones for supporting industries with an aim to attract foreign multinational groups.

Many public investment projects lack supervision

Up to 40% of the public investment projects nationwide have not been supervised by relevant State agencies and quality management entities in accordance with exisiting regulations, according to the head of the Investment Supervision and Appraisal Department under the Ministry of Planning and Investment.

Nguyen Xuan Tu told a seminar on building strategies for supervision and evaluation of public investments in Hanoi last week that ministries, agencies and local governments have carried out a total of 34,000-38,000 public investment projects with 24,000-26,000 or 60% of the total included supervision reports.

Tu said 40% of the public investment projects have not monitored and this is a major concern.

“This means using the State budget at many projects has not been reported but these projects are still implemented (by ministries, agencies and localities) though there are punitive sanctions for this,” he said.

This is why public investments have not been effective in the past year, Tu said and added that ministries and even the Prime Minister do not know well about the projects funded by the State budget as the developers and investors do not report the implementation of these projects.

Tu pointed out that a number of public investment projects have been delayed for a decade despite annual capital disbursements. He expected the Public Investment Law will help improve the situation when it takes effect next year.

The Government has deployed a monitoring and assessment system for public investment projects but this system can cover only 10,000 out of the nearly 40,000 projects. The Government will be able to keep track of all these projects when the system is updated.

Random and ineffective public investments remain a headache though the Prime Minister has ordered restoring the situation through Directive 1792. According to a recent report by the State Audit of Vietnam, many ministries and localities have used the State budget for their projects without careful consideration.

The localities allocating finances to the public investment projects which are not urgent include Quang Binh Province with 19 projects, Phu Tho Province with 13 projects and Son La Province with six.

Source: VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VIR