State Bank to increase compulsory reserve ratio on foreign currency 

The State Bank announced on April 9 of its decision to increase the compulsory reserve ratio on foreign currency to 2% and to apply a ceiling on the deposit rate of dollar to 3% per year. 

The ceiling interest rate for USD at 3% per year will take effect from April 13.

A representative from the State Bank stated that the dollar interest rate is currently at 4.65% per year and the lending interest rate at 6.83%, higher than the dollar interest rate in the international market. He added that this decision might help to stabilize the foreign currency market and attract more foreign currency from overseas.

Meanwhile, the increased compulsory reserve ratio on foreign currency will take effect from May 2011.

According to economic experts, the increase in the compulsory reserve ratio on foreign currency deposits is believed to help ease the foreign currency speculation and dollarization and make the financial market healthier.

Under the current regulations, the compulsory reserve ratio on demand deposits and deposits with fixed terms of less than 12 months is 4% of the total deposit. The ratio is 2% on deposits with fixed terms of longer than 12 months.

The increase in the compulsory reserve ratio will force banks to consider lowering deposit interest rates and raise lending interest rates to offset the higher capital mobilization costs.

Once the deposit interest rates decrease, people will find the interest they get from deposits unattractive. Therefore, they will make deposits in Vietnamese Dong instead of foreign currency.

Saigon Co.op Mart offers huge discounts on 15th anniversary 

Saigon Co.op Mart announced on April 8 that it would mark its 15th anniversary with a huge discount offer on 1, 500 items in coordination with 350 enterprises.  

Discount sales on 1,500 items will see prices slashed by 5% - 50% on items like fresh food, processed food, clothing and household goods.

Prices of Co.op Mart home brand products will be discounted by 5%- 30%. Home brand products are produced in factories that meet the quality standards as per government regulations. Co.op Mart is committed to supplying customers with quality goods.

Co.op Mart will also send 100 mobile vans to transport essential goods to remote areas, industrial zones and export processing zones in order to help workers and the poor to avail of their discount products.

It will also offer 15,000 gift vouchers to workers and the poor, worth a total VND1.5billion (US$75,000) besides other discount offers.

This 15th anniversary discount program worth VND40billion will start on April 16 and last until April 30.

Piaggio accelerates investment in Vietnam 

The government in the Northern Province of Vinh Phuc and Piaggio directors announced the kick-off of Piaggio's second phase of investment in Vietnam.  

Soon after its launch in Vietnam in June 2009, Piaggio successfully achieved all its initial objectives. Thanks to this success, the Italian brand has now stepped up speed by establishing Vietnam as the launch pad for its presence in Asia.

Since the completion of its first US$30 million factory in June 2009, Piaggio Vietnam has successfully accomplished its task to be now the first Italian investor in Vietnam. 

With this new $ 40 million investment in production and Research& Development, the group reinforces its position as the biggest Italian economic factor in the region, taking full advantage of the excellent strategic base that is Vietnam.

Piaggio Vietnam has also decided to expand and upgrade the 26.000 square-meter existing plant for its Group Research and Development Center. This is a powerful symbol of the group‘s ambitions for the times to come.

The new R&D center will be fully dedicated to the development of new vehicle concepts aimed at Asian consumer needs. It highlights Piaggio’s commitment to invest in value-added products and innovative designs in Vietnam. It also demonstrates the company’s dedication to enhance the role of the Vietnam hub in its worldwide strategy.

To strengthen its success and continue to grow, Piaggio strongly reinforces its production capacities in Vietnam by building a new facility on its site in Vinh Phuc province. With this new 20.000 square meter industrial structure, implementing the best of Piaggio’s technologies and processes, the Group will be able to raise the production from 100 000 units per year to 300 000 by mid 2012.

In addition, a new spare-part warehouse to improve after sales services will be opened. These significant steps are made in order to respond to the Vietnamese growing demand as well as the Southeast Asian market. Piaggio models are indeed in great demand in Japan, Thailand, Malaysia and Korea and raise a growing interest in Australia, Indonesia and Taiwan, where the Made-in-Vietnam will be launched later this year.

To seduce discerning consumers, the group offers the best of Italian design and mechanical knowhow, without any compromise. Piaggio Vietnam offers a new 2011 range of Premium products, with the introduction of the fuel injection engine on all high-end models: the Vespa LX 125/150 i.e., the Vespa S 125/150 i.e., the Piaggio Liberty i.e. Piaggio also launches the ZIP 100, a highly competitive model specially re-fitted to adapt to Vietnamese needs.

This new generation of products meet the demands of consumers looking for premium brands with a unique style, incorporating the latest technologies. 

This major investment for Piaggio is also a great opportunity for the area. The project will create new and qualified jobs, with a total workforce reaching up to 1000 employees by the end of 2012. The countdown starts now; 14 months will elapse from today’s ceremony until the launch of the new site in June 2012.

Mr. Trinh Dinh Dung, Vice-Minister of Ministry of Construction; Mr. Pham Van Vong, Members of the Party Central Committee, Party Secretary of the northern province of Vinh Phuc; Mr. Phung Quang Hung, Chairman of Vinh Phuc province People’s Committee;  Mr. Reberto Colannino, Piaggio Chairman and Chief Executive Officer ; Mr. Costantino Sambuy, Piaggio’s Vietnam Président attended the event.

Vietnam needs to reduce dollar’s use in economy, ADB aide says 

Vietnam needs to reduce US dollar transactions in its economy and restore confidence in the dong as faster inflation deters use of the local currency, said Ayumi Konishi, the Asian Development Bank’s Vietnam director.

Dollars make up about 20 percent of money used in Vietnam, Konishi told reporters at a conference in Hanoi Wednesday. With inflation a concern, “people really didn’t feel comfortable to hold onto their assets in dong, they rushed to the gold market or the money changers, got dollars and put them under the pillow,” he said.

The depletion of Vietnam’s foreign-exchange reserves is also prompting locals to push down the dong, Konishi said.

Foreign reserves of Vietnam were estimated at US$12.4 billion at the end of 2010, covering about 1.9 months of imports, the ADB said in a report released on Wednesday. The World Bank in March 21 gave the same figures and said that fell from $14.2 billion at the end of 2009 and $23 billion at the end of 2008.

The Southeast Asian nation has been struggling to combat inflation at a 25-month high. Prime Minister Nguyen Tan Dung in February approved a resolution asking ministries to narrow a budget deficit to less than 5 percent of gross domestic product and cut credit growth to less than 20 percent from 23 percent. He also lowered the money-supply growth target to about 15 percent to 16 percent from as much as 24 percent.

“Even with a successful implementation of the resolution, it will take time for the inflation numbers to come down,” Konishi said. “Inflation is anticipated to remain high through 2011 averaging 13.3 percent before moderating to an average 6.8 percent in 2012.”

Consumer prices increased 13.89 percent in March from a year earlier, the fastest pace since February 2009, the statistics office said March 24. Prices were fanned by more expensive energy and higher import costs caused by devaluations of the dong. The government targeted curbing inflation at no more than 7 percent this year.

“I do think that as a medium-term goal for Vietnam, to really eliminate, reduce the dollarization in its economy is certainly a necessary step,” Konishi said.

PVN reschedules many projects in Q1

The Vietnam National Oil and Gas Corporation (PVN) has put on hold 19 projects while progressing work on 45 of their projects, worth a total of about VND6.6 trillion in the first quarter of 2011.

The 19 projects placed on hold were worth VND582billion and the 45 on-going projects are worth VND6trillion.

The state-owned group also started eight projects and inaugurated 14 new ones.

This was disclosed at an online press briefing on April 6 to report the results of the group’s business and production activities in the first quarter.

PVN has exceeded some major targets set for the first quarter. The group’s total revenues reached VND151.2 trillion, equal to 119.3 percent of the set target and a 59.4 percent increase on a year-on-year basis.

PVN contributed VND36.5 trillion to the state budget, representing 123.8 percent of the plan and an increase of 35 percent over the same period of last year.

VNPost offices to distribute Air Mekong e-tickets 

A corporate agreement to create a new distribution system for Air Mekong e-tickets was signed between Vietnam Post Corporation (VNPost) and The Ha Long Investment and Development Company (BIM Group) on April 8. 

Under the agreement, customers can book Air Mekong e-tickets at 18,000 post offices nationwide. This means that each VN Post office will be a sales office for Air Mekong e-tickets. Customers booking tickets elsewhere can make their payment at the VN post office.

The VN Post is a member of the Viet Nam Post and Telecommunication Group (VNPT) and has branches in 63 cities and provinces.

The BIM Group is a domestic investor in many sectors, including property, health care, trade and aviation.

Irrigation project receives international support

The Asian Development Bank and the French Government's development agency are providing additional funds to complete an irrigation and water management project that is expected to boost growth in HCM City's rural, urban, and industrial areas and neighbouring provinces.

The ADB recently approved a supplementary loan of US$60 million for the Phuoc Hoa Water Resources Project, while Agence Francaise de Developpement (AFD) will provide $25 million.

ADB and AFD had initially pledged a combined $124 million for the project to build irrigation systems and supply water for domestic and industrial use and to develop management skills in government oversight agencies and community water user groups.

But a cost over-run due to delays in implementation – the project was mooted in 2003 – and high inflation caused a financing gap of more than $131 million.

At the request of the Vietnamese Government, which has earmarked the project as a key development priority, it was agreed to extend additional funds.

The new loan will supplement the original loan which enabled the construction of Phuoc Hoa transfer canal to divert water from Be River in southern Binh Phuoc Province to a reservoir on Sai Gon River.

The Government will bring in $42.9 million in matching funds, with farmer beneficiaries contributing $3.7 million in kind.

The Ministry of Agriculture and Rural Development is the executing agency for the project which is expected to be finished in March 2014 at a total cost of $329.5 million.

Banks told to increase dollar reserves

The State Bank of Viet Nam increased the compulsory reserve ratio for foreign currency deposits held by commercial banks to 6 per cent on Saturday, an increase of two percentage points, effective on Wednesday. The ratio was set at 5 per cent for Agribank, the Central People's Credit Union and co-operative banks.

The State Bank also capped interest rates that commercial banks can pay on US dollar deposits at 3 per cent per year.

"This is a dual move to cool down the overheated market in US dollars and to raise the value of the Vietnamese dong," said Nguyen Van Khanh, head of the investment section for a HCM City-based brokerage, who predicted the change would have a positive impact on the nation's stock markets in the coming week, as investors switch to higher yield investments.

Viet Nam Association of Finance Investors general secretary Nguyen Hoang Hai said the new deposit interest ceiling would help end recent speculation in US dollars.

In a separate letter issued on Friday, the State Bank also ordered strengthened inspections of gold traders and foreign exchange services in a bid to stabilise the foreign exchange market and ferret out unlawful forex activities. Currency traders found in violation of regulations would be subject to permanent licence revocation.

The State Bank letter was issued in response to signs that illegal currency trading had picked up again after slowing in recent weeks following February's devaluation of the dong.

Government efforts to cool down the foreign exchange market seemed to be paying off, commented Phan Thi Thanh Binh, co-head of ANZ Bank's Global Markets Viet Nam, with the devalution narrowing the previously wide gap between the official and black market forex rates.

"However, the pressure on the exchange rate will continue to be high due to other factors," Binh said.

The trade deficit, which topped $3 billion in the first quarter, would remain high due to high levels of machinery and equipment imports, as well as imports of fuel, feedstock and raw materials.

Power plants complain about financial losses

Investors of power plants in the Central Highlands province of Kon Tum say they are losing money as they have been told to cut production because local transmission lines lack sufficient capacity.

Nguyen Duc, director of the province's Electricity Department, said the transmission line capacity was only 100MW, while the total capacity of the small – and medium-sized power plants was 160MW.

EVN's (Electricity of Viet Nam) Central Power Company, the upper manager of the local electricity department, was drafting a plan to upgrade the transmission line, reported Sai Gon Giai Phong (Liberated Sai Gon).

"Plants must reduce production every day, including during peak hours," Duc said.

Investors of several of the plants, which had no water reservoirs, complained, pointing to financial losses.

Nguyen Thi Hue Ly, investor of the 3.6-MW Dak Pone 2 power plant, said her plant had been asked to lower or cut productivity to zero only after one year in operation.

An investor of another plant, the Dak Pone, said it had to cut its supply 23 times since the beginning of the year, causing losses since the investment came from bank loans.

According to agreements with the local electricity department, the department has responsibility to use the full capacity of power plants invested in by the private sector.

Fertiliser industry eyes growth potential

Domestic urea fertiliser market capacity could increase by 350 per cent by 2015, experts said.

Currently only two urea fertiliser plants, the Ha Bac and the Phu My, are operating with a total capacity of about 980,000 tonnes per year.

However, in the coming time, a slew of new plants will be put into operation, with many old plants set for upgrading.

The Ninh Binh Fertiliser Plant with an annual capacity of 560,000 tonnes per year would begin operations at the end of this year, said project head Chu Van Tuan.

The Ca Mau Fertiliser Plant which can produce 800,000 tonnes of fertiliser per annum will also finish construction by the end of this year. Construction will also begin on the Cong Thanh Plant in the central province of Thanh Hoa with an output of 560,000 tonnes per year.

Meanwhile, the upgrade of the Ha Bac Fertiliser Plant will be complete in 2014.

With these developments, the domestic fertiliser market will rapidly expand. By 2015, total capacity may exceed 3 million tonnes.

With impending increased capacity, experts forecast that by 2015 the domestic market will be transformed, with total national demand only standing at 2.2 million tonnes per year.

Despite increased domestic production, tougher foreign competition will arise and companies will have to drive to expand export markets.

A representative from the PetroVietnam Fertiliser and Chemicals JSC said his company had started researching new export markets for urea fertiliser. The company was also diversifying sales to sectors beyond agriculture.

To resolve a potential fertiliser glut, companies are being prompted to invest in other fertilisers such as potassium and the diammonium phosphate (DAP).

Viet Nam currently faces a shortage of potassium and DAP fertiliser. The country annually imports 700,000 tonnes of each, yet domestic producers are capable of producing these products.

Along with finding new export markets, fertiliser manufacturers should find different ways of developing their products, suggested head of Chemical Department under the Ministry of Industry and Trade Phung Ha.

PVFC provide risk insurance for foreign currency borrower

PetroVietnam Finance Corporation (PVFC) is working with Morgan Stanley Group on the provision of derivative insurance services to limit risks to customer who borrow foreign currency.

According to Nguyen Thien Bao, General Director of PVFC, in the context of fluctuating USD / VND exchange rate at present, PVFC will focus on providing short-term contracts with fixed interest rate to reduce risks for both sides.

At present, PVFC is working to arrange almost $4 billion for the national key projects of the oil and gas industry such as Vung Ang Thermal Power Plant, Long Phu Song Hau Thermal Power Plant, Thai Binh 2 Thermal Power Plant, O Mon Gas Pipeline - Lot B.

In the third quarter, PVFC expects to sign contracts with the International Swaps and Derivatives Association (ISDA), which has 820 members in 57 countries participating in the derivatives market, as the basis for implementation of specific derivative contracts in the coming time.

More banks cut dollar interest rate

More commercial banks have cut deposit interest rates for the US dollar by 0.1-0.4 percentage points, showing that the State Bank's tighter rules on dollar lending are taking effect.

Sacombank is offering 4.62 per cent per year for six-month deposits under US$10,000 and 4.5 per cent for all other terms above and below six months for the same amount.

For bigger deposits, the highest interest rate was 4.88 per cent for two-three month terms and less than 4.7 per cent for all other terms, above and below. Terms deposits under a month were being offered less than 1 per cent.

The state-owned Agribank has cut its highest interest rate from 5.55 per cent to 5.3 per cent for a nine-month term. Terms of 18-24 months would earn 4.7-4.8 per cent; all other terms 5-5.2 per cent.

Earlier, Eximbank, Kienlong Bank, VietinBank, PG Bank, SeABank, VietABank have cut dollar deposits interest rates by 0.1-0.25 percentage points.

"The reduction is not so strong because banks are very cautious to balance capital as well as see the effects of the Government's policy in the inflation fight," said Nguyen Thanh Toai, deputy general director of Asia Commercial Bank.