Local cardholders still use cards for cash withdrawal

Though the Vietnamese payment card industry has posted impressive growth over the last 20 years, most local cardholders still use the cards for cash withdrawal, rather than conducting their payments with them.

A huge number of workers in the industrial parks and processing-exporting zones in Ho Chi Minh City, Dong Nai and Binh Duong provinces are now receiving wages via ATM cards, but none of them have ever used the plastics for purposes other than drawing cash.

Minh Tuyen, a resident in Ho Chi Minh City’s Thu Duc District, told Nguoi Lao Dong newspaper that she has never used card payment or any value-added services provided by the bank via the plastics, although her salary is paid directly to her bank account.

Hence, long lines of workers queuing in front of ATM booths on salary-payment day have become commonplace, and technical problems such as the machines running out of cash, or becoming inoperable are inevitable.

In 2006, the domestic card payment market consisted of only 5 millions plastics, 3,000 ATMs, and around 11,000 points of sale (POS). By the end of last year, the number of cards rose drastically to 40 million, while the respective figures for ATMs and POSs are 13,000 and 7,000.

Nearly 50 credit institutions countrywide are also offering more than 200 different brands of ATM cards.

“The growth of bank cards is the most impressive out of the non-cash payment sectors,” said Duong Hong Phuong, deputy head of the State Bank of Vietnam’s Payment Agency.

Along with the growth of payment plastics, many banks also offer more services that can be paid via ATM cards such as clearing power, water, and telephone bills, or paying school fees.

“Boosting non-cash payment will not only help reduce the amount of cash circulating in the economy, but also facilitate the central bank’s monetary policy,” said Vu Viet Ngoan, chairman of the Committee for National Financial Supervision.

However, with local cardholders sticking to the habit of paying via cash, payments recorded via plastics still post low growth.

According to the Vietnam Bank Card Association, more than 83.2 percent of transactions via ATM cards in 2010 were cash withdrawals, while only 0.5 percent were card payments.

Besides the habit of using cash, the unsynchronized infrastructure is also one of the reasons behind the modest use of card payment.

In major restaurants and supermarkets around HCMC, the POS only accept credit cards, rather than ATM cards; while discounts or promotional programs are also subject to payment via credit cards only.

Meanwhile, some international hotels only equip POS for international credit cards, rather than for local ATM plastics.

Nguyen Van Dung, deputy director of the central bank’s branch in HCMC, said payment via POS can help banks save expenses in expanding the ATM networks, while reducing workload for the machines.

However, Dung added, the largest obstacle for card payment is the banks’ inadequate investment in relevant technologies for the infrastructure.

Statistics show that the rate of unsuccessful transactions via POS of Banknetvn is 29 percent, while the respective figures for Smartlink and VNBC are 20 percent, and 19 percent.

Bridgestone sets its 50th manufacturing base in Dinh Vu IZ

Bridgestone Tire Manufacturing Vietnam, an affiliate company of Japan’s Bridgestone Corporation today received an investment certificate to build a passenger car tire manufacturing plant in Haiphong port city’s Dinh Vu Industrial Zone.

The new facility capitalised at $575 million with production capacity of 24,700 units per day in stable production year covers over a surface of 102.43 hectares in the zone.

This is the fiftieth plant of Bridgestone Corporation in the world. The Japanese group currently produces new tires at 47 plants in 20 countries. After the start-up of a new plant in India, a plant for large and ultra-large off-the-road radial tires for construction and mining vehicles in the United States, and this new plant in Vietnam, Bridgestone will have a production system of 50 plants in 21 countries.

The new plant in Dinh Vu will start production in the first half of 2014. Once the products are launched, they all will be exported. The project shall create a job for a total of 1,900 employees.

Dinh Vu Industrial Zone is proud to have Bridgestone Tire Manufacturing Vietnam as its fifth Japanese investor, following Nakashima (propeller production), RK Engineering (steel tank production), SIC (LAS production), Shin-Etsu (rare earth magnet production).

Bridgestone has selected the Dinh Vu Industrial Zone because of its strategic location, its access to the port located directly in the zone, the availability of reliable utilities, and the best tax incentives applied for economic zone.

After achieving the development of its first phase of 164 ha, Dinh Vu Industrial Zone is currently developing and marketing its second phase of 377 ha.

At the end of 2011, Dinh Vu Industrial Zone has put into operation its waste water treatment plant with a capacity of treatment for 2,500 cubic metres per day.

The Dinh Vu Industrial Zone is a multi industry zone allowing its client to create synergy between each others. Dinh Vu Industrial zone welcomes clients in its petrochemical area, its heavy industry area and its general light industry area.

With the approved licence of Bridgestone Tire Manufacturing Vietnam records more than $1.5 billion investment capital in the zone, of which Japanese investor representing about 45 per cent of the total investment capital. It is expected that the zone shall welcome $100 million more by the end of 2012.

Corporate tax deadline extended

The Prime Minister issued Decision No 04/2012/QD-TTg on January 19, extending by an additional three months the dealines for paying corporate income taxes due from small- and medium-sized enterprises and labour-intensive enterprises for the first and second quarters of last year. Under the decision, the deadline for first quarter 2011 tax payments is moved to July 30, 2012, and that for second quarter payments becomes October 30, 2012.

The deadlines have been previously extended twice, under Decision No 21/2011/QD-TTg of April 6, 2011, and Decision No 54/2011/QD-TTg of October 11, 2011.

New rules for temporary residency

The Ministry of Public Security and the Ministry of Foreign Affairs issued Joint Circular No 01/2012/TTLT-BCA-BNG on January 3, clarifying regulations and procedures for foreigners seeking a temporary residence card (TRC). Accordingly, foreigners applying for a TRC shall submit a dossier to the Immigration Department or Police Immigration Office at the provincial level. The dossier must include: Application for TRC (Form No N7A); information document of the foreigner requesting TRC (Form No N7B); passport; and documents proving the purpose of residing in Viet Nam, e.g., a work permit, certification as the head of a representative office, member of a board of management, or other equivalent documents. A TRC shall be granted for each individual under Form N8 attached to the joint circular. The joint circular takes effects 45 days from the date of signing.

Ministry sets auction royalty rates

The Ministry of Finance issued Circular No 03/2012/TT-BTC on January 5, regulating auction royalties and fees paid to professional auction organisations by individuals and entities selling property by auction pursuant to Decree No 17/2010/ND-CP of March 4, 2010.

Under the circular, the royalty rate is to be calculated upon the value of property sold at auction. If the property is sold for less than VND50 million (US$2,300), the royalty shall be 5 per cent of the value; if the property is sold for VND50 million to under VND1 billion ($ 47.620), the royalty shall be VND2.5 million plus 1.5 per cent of the value of the property in excess of VND50 million. The total royalty shall not exceed VND300 million ($14,280) in a single auction.

Auction organisations shall receive a fee of VND50,000 for property valued at up to VND20 million ($950) and VND100,000 for property valued at VND20 million to VND50 million. The circular also sets the fee these organisations must pay to receive an auction practice certificate at VND200,000, or VND100,000 to renew the certificate.

The circular takes effect on March 1, replacing Circular No 96/2006/TT-BTC of January 2006.

Industrial property rights protected

The Ministry of Science and Technology issued Circular No 37/2011/TT-BKHCN on December 27, 2011, guiding implementation of Government Decree No 97/2010/ND-CP of September 2010 on administrative sanctions for industrial property violations. The new circular defines the unlawful gains arising from infringements of industrial property rights to include the sale price of infringed goods and services based on valid receipts and documents. If needed, competent authorities shall inspect, verify and collect evidence in accordance with the law. The circular, which also details behaviours constituting violations of industrial property rights, takes effect on February 10.

Stocks still rise in HCM City, retreat in Ha Noi

There were positive signs on the HCM City Stock Exchange this morning, but profit-taking activities had a negative affect on the Ha Noi bourse.

In HCM City, the VN-Index concluded this morning's session at 390.67 points, up 0.7 per cent over yesterday.

Trading volume remained unchanged compared to yesterday with 39.2 million shares changing hands, but the value of trades rose 22 per cent to VND622.5 billion (US$29.6 million).

Eight of the 10 leading shares by capitalisation posted gains, of which property developer Hoang Anh Gia Lai (HAG), steelmaker Hoa Phat Group (HPG) and PetroVietnam Finance (PVF) hit their ceiling prices. However, a decline of 2.8 per cent by heavyweight stock Masan Group (MSN) held back the Index.

Transactions still focused on penny and mid-cap stocks such as Becamex Infrastructure Development (IJC), PetroVietnam Transportation (PVT), Idico - Petroleum Trading Construction Investment (PXL), Tan Tao Investment Industry (ITA) and Viet Nam Electricity Construction (VNE), pushing them to the ceiling.

Decliners shaded advancers 109-110 overall.

Eximbank (EIB) was the most active in HCM City with nearly 2.5 million shares traded, closing up 1.4 per cent at VND15,000 ($0.71).

On the Ha Noi Stock Exchange, the HNX-Index lost 0.2 per cent to close today at 60.47 points.

Both trading volume and value slumped over 20 per cent, totalling 30.6 million shares worth VND238.2 billion ($11.3 million)

Losers outnumbered gainers by 147-95.

PetroVietnam Construction (PVX) was still the most heavily-traded stock nationwide, with over 4 million shares changing hands. PVX rose 4 per cent to close at VND7,800.

Restructuring plan for Vietnam’s Agribank to be adopted in Feb

The government may adopt the restructuring plan for the Bank for Agriculture and Rural Development of Vietnam, better known as Agribank, in February, said a senior official of the bank.

The restructuring roadmap for the biggest commercial bank inof Vietnam may last for 3-4 years, Nguyen Ngoc Bao, chairman of Agribank’s board of directors, told newswire Vneconomy.

The main objective of this plan is to put Agribank back on track and become- a state-owned commercial bank performing critical tasks set out by the government and the State Bank of Vietnam (SBV) for agriculture and rural development, Bao said.

During the restructuring, the bank will continue to hold market share in major economic hubs, such as Hanoi and Ho Chi Minh City. But it will mainly focus on three tasks: raising capital, developing and improving banking services, and promoting its branding campaign.

Currently, Agribank is managing nine related business segments, including insurance, securities, gold, and financial leasing.

This is an issue to be addressed in the restructuring process, Bao said.

"We will only keep the companies operating in the field of financial and monetary fields which areis directly related to the operations of Agribank, including companies specializing in treasury and insurance services,” Bao added.

By the end in 2011, Agribank’s capital adequacy ratio (CAR) increased from 6.4 percent to 8 percent. The CAR may even rise to 9 percent if the government approves theto raisinge of an additional VND30 trillion ($393.5 million) for its chartered capital.

ItsThe bank’s bad debts fell from nearly 7 percent in H1/2011 to 6 percent by the year-end. In 2012, Agribank will restructure the bad debts in Hanoi and Ho Chi Minh City, striving to bring the bad debt ratio to 5 percent.

Established in March 1988, Agribank is the leading commercial banks and holds a key role and key in the development of Vietnam's economy, especially through investment in agriculture, farmers and rural areas.

It washas been ranked at No.10 in the VNR500 – the 500 largest Vietnamese enterprises in terms of revenues in 2011.

As of September 2011, Agribank is the largest bank in Vietnam in terms of assets, capital, staff members, operational network and customers with VND524 trillion, VND478 trillion, 37,500 employees and over 2,300 branches and transaction offices, and over 10 million customers.

First Vietnamese-made urea fertilizer hits local market

Southern Ca Mau Province-based Ca Mau Nitrogenous Fertilizer Plant under the National Petroleum and Gas Group (PVN) has churned out the first batch of Vietnamese-made urea fertilizer for the local market.

The $800 million plant with annual capacity of 800,000 tons is expected to meet 40 percent of domestic demand, enough for farming activities in the Mekong Delta - Vietnam’s key agricultural region.

It will help save around $400 million spent on urea fertilizer imports for the country every year, said Prime Minister Nguyen Tan Dung.

The plant, a part of the $1.4 billion Ca Mau Gas-Power- Fertilizer complex covering 62 hectares in U Minh District in the southernmost location of Vietnam, succeeded in the trial run of the plant to produce the first product on November 24, 2011.

Earlier, PVN, as the largest shareholder of PertroVietnam Fertilizer and Chemicals Corp (PVFCCo), had failed in persuading PVFCCo’s shareholders and PVN’s strategic partner Oman Oil Co to acquire 49 percent of the plant.

PVFCCo, the operator of Phu My Fertilizer Plant, took the helm at the plant in 2009, providing manpower, taking charge of management, and distributing products of the fertilizer project nationwide.

The 2 fertilizer plants are projected to meet 70 percent of the country’s demand.

PVN and two joint venture companies, Vu Han Designing Co and China Import-Export Co, began construction of the plant in late July 2008.

Ba Ria-Vung Tau licenses four new projects

The southern province of Ba Ria-Vung Tau on January 31 granted licenses to four new projects with total investment capital of VND26,729 billion (US$1.3 billion), accounting for 30 percent of province’s targeted registered capital for 2012.

The projects include the Nam Con Son 2 gas pipeline, Phuoc Thang urban area, Gelexim port and kindergarten, and Phuoc An centre for disabled children.

Seven investors also donated VND1.31 billion to the provincial charity funds to help the handicapped and the poor.

Despite economic difficulties, Ba Ria-Vung Tau attracted 25 foreign investment projects in 2011 with total capital of US$950 million, as well as 38 domestic investment projects worth nearly VND12 trillion (roughly US$570 million).

The province also created jobs for 33,500 labourers last year.


Delta authorities detect huge amount of substandard fertilizers

The market management agencies in several Mekong Delta provinces have raided and detected a large amount of poor quality or fake fertilizers from local producers, which have caused steep losses for farmers using them.

The Tien Giang Market Management Agency last year discovered eight samples of substandard fertilizers, said Do Van Phuoc, head of the institution.

Many products claimed to have an organic content of 20 percent, while the agency’s test later found that the real figure was no more than 15 percent, added Phuoc.

“There are even cases when the potassium oxide content tested was only 0.1 percent, 10 times lower than what was claimed by the producers,” he said.

The Tien Giang Market Management Agency has thus imposed sanctions on five manufacturers, including the SuMo JSC, Sitto Vietnam Co, Can Tho Fertilizer and Chemical Co, Viet Nong Co, and Nong Duyen Co Ltd.

Earlier this year, the institution also found many products faking Lido Thai fertilizer, a brand registered by the Greenfield Co Ltd. These products were found bearing labels such as Lido Korea and Lido Japan.

In Vinh Long, the provincial market management officials also detected tons of poor quality fertilizers thanks to complaints from local farmers.

Le Minh Duc, director of the Long An Department of Agriculture and Rural Development, said that only by setting the heaviest penalties on the fraudulent manufacturers can the authorities curb the circulation of substandard fertilizers.

In fact, authorities found it hard to conduct check-ups on all of the fertilizers available on the market since there are too many producers and product brands, said Duc.

“One of the drawbacks of the authorities’ crackdown on the issue is that the manufacturers usually manage to sell out nearly their entire stock of poor quality products before the officials catch them,” he said.

“Meanwhile, the current penalties are not strict enough to discourage the manufacturers from halting their fraud.”

For his part, La Van Be, head of the Ben Tre Market Management Agency, suggested that the government should restrict license granting for fertilizer producers.

“Some small manufacturers only use hoes and shovels in mixing fertilizers, which will not ensure the product quality,” he said.

Meanwhile, Pham Van Du, an official from the Ministry of Agriculture and Rural Development, admitted that most of the substandard fertilizers are produced by small manufacturers.

“Moreover, [the products] are consumed mostly in the remote areas of the Mekong Delta, making it hard for the authorities to crack down on them.”

Restructuring scheme should prioritize banking reform: experts

The government’s economic restructuring scheme in 2012 should focus on banking reform first, Vu Thanh Tu Anh, director of research at the Fulbright Economics Teaching Program in Ho Chi Minh City, told Tien Phong newspaper.

“I think the number one priority is to reform the commercial system and the regulatory framework for commercial banks.”

“Currently, potential disruptions to the economy lie primarily in the banking sector,” he told Tien Phong newspaper.

The banking system's liquidity has recently emerged as a big problem with interest rates on the interbank market skyrocketing to 30-40 percent and remaining at such high levels for a long time.

Non-performing loans (NPLs), or bad debts, have even appeared on the interbank market, thus building up risk and constraining liquidity.

In addition, NPLs of real estate projects are likely to rise since the property market is forecast to remain frozen this year.

After a one- or two-year hold, investors now cannot hold out any longer, potentially causing an accelerated process of NPLs of the banking sector that, if not well controlled, could even lead to a big crash, Anh said.

The reform of public investment and big state-owned enterprises (SOEs) will take a lot of time, thanks to the involvement of a variety of interest groups, and therefore it should be considered a problem in the medium and long term.

On the other end of the spectrum, the banking sector of Vietnam is now the potential systemic risk, which could trigger an economic collapse.

This is the first reason for the government to put a high priority on the reform of the banking sector.

The second reason for it is the ripple effect of the restructuring of the banking system.

If the restructuring results in the reallocation of commercial lending for only effective projects, which will not be evaluated based on relational or political factors, it will have served a very important purpose: the effective allocation of a finite resource, namely the financial resources and credit of a nation, to be used the most effective way.

Accomplishing this will help increase the efficiency of the economy and help reduce inflation.

When the relationship between banks and enterprises becomes a commercial relationship it will immediately reduce the influence of the large SOEs sector - the sole economic sector which is said to be less effective, and would then reallocate resources capital to the private sector - which generates the majority of jobs and generates three-quarters of GDP growth.

The third reason is related to feasibility.

Among 43 commercial banks nationwide, there are some 10 that have real problems. The separation of the 10 banks is much easier than the management of thousands of public investment projects or about the roughly 1,300 SOEs.

Moreover, compared with the policy impact of public investment and state enterprises, the monetary policy, conducted via the banking system, will be more transparent, and have faster transmission speed to the whole economy, so it is suitable to solve the problem in the short term.

Handling the banking system well will lay the groundwork for handling the remaining two issues: the restructuring of public investment and the SOEs.

Currently, the economy is under high pressure, with high inflation and certain destabilizing factors which can cause macroeconomic instability, including high public debt, large budget deficits, and limited government resources.

Besides, Vietnam doesn’t yet have a complete legal system for the restructuring of the banking sector, especially the problem of bankruptcy and ownership of property and financial obligations, Nguyen Van Giau, governor of the State Bank of Vietnam, told Phap Luat newspaper.

In addition to domestic factors, the State Bank is also under pressure from adverse developments in the world economy. These factors impact the psychological instability of the local people, the governor said.

Initially, the SBV will prioritize the evaluation and classification of banks into three categories: healthy, temporary lack of liquidity, and weak.

The healthy banks will facilitate the development of scale and competitiveness, while the weak financial institutions will be prioritized for restructuring.

If weak banks cannot recover, they must pull out of the business in an orderly manner, so it will not destabilize the whole system.

Some banks which are facing a liquidity shortage will receive support from the SBV to restore sound financial footing, and then must reorganize and consolidate to operate in a healthy way.

The head of the bank said the government and the central bank will not "subsidize" all the costs for the restructuring of banks.

Losses and costs in the processing of the weak banks should have a reasonable share of the State between the parties, owners, investors and depositors.

In particular, bank owners are responsible first and last.

The government and the central bank should continue to reform and perfect the legal frameworks and documents on banking activities, including safety standards and risk management, credit regulations, regulations on loan classification and provision for risk, and the regulations that permit the establishment of banks.

Banks to reduce interest rates by 10 percent

Bank deposit interest rates will likely drop to about 10 percent per year if the government achieves its set target of controlling the rate of inflation at 9-9.5 percent by yearend, said State Bank Governor Nguyen Van Binh.  

Such a decrease is possible given the fact that the consumer price index (CPI) has gradually slowed down at a rate of less than 1 percent since August last year. Moreover, the State Bank of Vietnam (SVB) is bent on solving the liquidity of some credit institutions.

The gold market, he added, must ensure people’s right to reserve gold while helping banks mobilize capital resources for socio-economic development.

The SVB will submit a project in this connection to the Government. Accordingly, the State will mobilize gold through credit institutions meaning that it will not intervene in the market directly.

Effective measures will be taken; for instance, by trading gold in the world market the State will be able to control fluctuations in gold prices, secure the people’s assets and exchange gold into foreign currency to serve the need of socio-economic development.

In 2012, the SVB plans to strictly deal with weak financial institutions to ensure the stability of the whole credit system in Vietnam for the benefit of sustainable development, Binh said.

Rice exports on rise

Vietnam shipped 184,558 tonnes of rice to overseas markets in the first 20 days of January, earning US$103.308 million.

The Vietnam Food Association (VFA) predicted that the total export volume of rice will reach 6.5-7 million tonnes by the end of this year.

After the Lunar New Year Festival (Tet), many foreign traders flocked to the Mekong Delta region to place orders for rice.

Truong Thanh Phong, VFA Chairman, said that Vietnam has exported nearly 40,000 tonnes of rice to Hong Kong and the country is very keen on this promising market.

Vietnam will enjoy more advantages in exporting rice as many countries in the world are likely to face food shortages due to natural disasters, he said. However, the country should consider new policies for large rice exporters while ensuring a profit of at least 30 percent for local rice growers, he added.

According to the Ministry of Agriculture and Rural Development (MARD), the country’s total rice output in 2012 is expected to hit 42 million tonnes, including 7-8 million tonnes for export. However, the VFA suggested shipping only 6.5-7 million tonnes abroad to ensure food security on the domestic market.

Unseasonably low CPI rise bodes well for year ahead

The Consumer Price Index (CPI) increased by 1 percent in January against the previous month, the smallest growth for any January during the past 10 years, according to the General Statistics Office (GSO).  

January’s CPI marked the sixth consecutive month of increases of less than 1 percent. This has been seen as a positive result, since the CPI in January each year usually experiences a dramatic surge following the Lunar New Year festival (Tet).

However, in January this year, only four out of 14 commodity and service groups saw an increase of more than 1 percent due to Tet and a rise in the price of electricity which was adjusted at the end of December last year. Specifically, garments, hats and footwear rose by 1.97 percent, housing including rent, electricity, water, gas and construction materials (1.71 percent), foodstuff (1.41 percent) and beverage and tobacco (1.17 percent).

Two commodity and service groups declined in price, including post and telecoms, down by 0.01 percent and food (0.14 percent).

Meanwhile, the prices of eight other groups increased slightly by less than 1 percent.

The slow pace of CPI increase was partly due to the State Bank of Vietnam;s tightened monetary policies.

Experts forecast the CPI for 2012 to be lower than initially targeted, which will help commercial banks reduce lending interest rates and pump more money to businesses that have been grappling with difficulties in securing funds for production.

Heads roll in wave of bank woes

The banking industry has experienced a roller-coaster year, with concerns over the sector's liquidity and pressure on high interest rates adding to a long list of woes. Chief Executive Officers at banks did not escape the turbulence in the sector, with many CEOs losing their jobs.

The past year saw increased efforts among banks to restructure their organisations, and changing CEOs presented an opportunity to inject new leadership talent at some banks.

Last December, Nguyen Duc Vinh left his job as CEO at the Technology and Commerce Joint Stock Bank (Techcombank), a position he had held for the past 12 years, and becoming a deputy chairman of the bank's management board.

Englishman Simon Morris is the new CEO, with Techcombank becoming the first Vietnamese bank to appoint a foreigner as CEO.

Also in December, the Viet Nam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) appointed Nguyen Van Thang as CEO position, replacing Pham Xuan Lap, who has retired before he had come to the end of his contract.

Thang has worked at Vietinbank for more than 15 years, starting out as a sales person at a branch office. Born in 1973, he is the youngest CEO among the State-owned commercial banks.

Pham Huy Hung, the chairman of the bank's management board, said the new CEO would help bolster the bank's development and integration into the global banking and financial market.

Last September, the Viet Nam International Bank (VIB) assigned Duong Thi Mai Hoa as its CEO. She has more than 18 years' experience in financing and accounts management and is a member of the Association of Certified Chartered Accountants (ACCA) in the UK.

Last July, the State Bank decided to replace CEO Pham Thanh Tan with Kieu Trong Tuyen for the Viet Nam Bank for Agriculture and Rural Development.

Early last year, Vu Tu was assigned as the new CEO of TienPhong Bank, replacing Dao Trong Khanh. Tu has more than 20 years' experience in the banking industry and was a director of a branch at Agribank and then CEO of the Oceanbank.

Tax on plastic bags sends prices soaring

The prices of plastic bags have shot up since the Environmental Protection Tax Law came into effect this month, slapping steep taxes on them.

From January 1 a kilogramme of plastic bags attracts a tax of up to VND50,000, as the Government seeks to reduce their use by supermarkets and shopping centres by 40 per cent by 2015.

This is causing difficulties for small traders who consume the majority of plastic bags.

Truong Phat, who runs a stall in Binh Tay market in HCM City's District 6, said the wholesale price of plastic bags has almost doubled to VND65,000-70,000 a kilogramme now.

Pham Thi Thu Hong, who has a fruit shop in Long Bien wholesale market in Ha Noi, said with a kilogramme of small plastic bags now costing VND70,000, up from VND43,000 earlier, she intended to raise the price of fruits to make up.

But despite the higher prices, sales of the bags remain high.

Dang Thi Thu An, a trader in Hue's Dong Ba Market, said she has no choice except to keep buying the bags because she cannot sell her goods without them.

Some small traders in Can Tho have even stocked up on the bags fearing their prices would increase further, sending their sales rising by more than 50 per cent month-on-month.

The owner of a fruit shop in Can Tho said: "I sell around 700 coconuts a day, so I need two kilogrammes of plastic bags to wrap them. With the increase in prices, my profits have fallen significantly."

Hung, a wholesale seller of the bags in Ha Noi's Hai Ba Trung District, said since it is not easy to change consumers' habits, small traders need to use them despite higher prices.

Local insurers must improve as foreign firms set up in VN

As Viet Nam continues to open up its insurance market further, allowing foreign non-life insurance companies to set up branches in the country, domestic firms will have to improve their act to cope with stronger competition, industry insiders say.

Phung Gia Loc, General Secretary of the Association of Vietnamese Insurers (AVI), said domestic non-life insurance companies will have to face more rivals with greater advantages this year.

Loc cited some of the advantages that foreign companies have, including having their cost accounting done at parent companies outside Viet Nam, greater financial potential and an advertising budget not governed by Vietnamese regulations.

Meanwhile, among the weaknesses of local insurers, he said the most challenging was the lack of information technology applications in customer management, including collection of premiums, and timely and accurate appraisals.

"In other countries, there are independent appraisal consultants as well as independent rescue institutions in other countries, while a local insurance company has to do all these things by itself, therefore their information handling is not as quick as it should be," he said.

Compensation procedures in Viet Nam are also more complicated and put local businesses at a disadvantage, he said.

Meanwhile, insurance companies in other countries offer good services and can also pay extra compensation as a goodwill gesture, he added.

Talking about market prospects, the AVI general secretary said that once the State reduces its stake in businesses so that the private sector has a larger one in the country's economy, the market will have a better environment for growth.

"In this context, businesses will be more willing to buy insurance as their responsibility will be closely linked to their assets" Loc said.

Last year the non-life insurance sector achieved a growth rate of around 25 per cent, reaching a total premium turnover of VND21.5 trillion (US$1 billion). The figure is expected to increase to VND27.6 trillion ($1.28 billion) this year, up 28 per cent.

Tet slows factory output
 
The industrial output of Ha Noi fell this month as enterprises scaled back operations for the Tet (lunar new year) holiday.

The industrial production index in January was 86 per cent of December 2011 level and 99 per cent of the level in January of 2011, according to the Ha Noi Statistics Office.

Economists attributed the decline to the impact of the global economic downturn as well as the long new year holiday. Industrial producers had also ramped up output in December to anticipate holiday demand, resulting in an inevitable fall-off in January.

Most major industrial sectors saw declines in output, including garments, paper, pharmaceuticals and bathroom fixtures. Breweries saw a reduction of 25.6 per cent in output from previous month and a decline of over 38 per cent compared to the same time last year.

However, some products saw increases in output, including machinery and equipment, up 21.4 per cent, and tobacco, up 15.5 per cent.

Industrial production for all of last year increased against the previous year, according to the statistics office, with automobile production rising by over 33 per cent, production of bathroom fixtures and tobacco by about 23 per cent each, and beer production by 8.6 per cent. The city was also projecting an increase of 9.3-10.4 per cent in the production of prefab industrial buildings this year.

Market restructure hopes boost shares

Shares continued to rise yesterday on both of the nation's stock exchanges as investors remained upbeat over comments by Minister of Finance Vuong Dinh Hue on Monday that the ministry was ready to take drastic measures to reorganise the market to ensure its sustainability.

Information released about the VN30, the new benchmark index on the HCMC Stock Exchange which will begin tracking share movements on February 6, also strenghthened investor confidence, FPT Securities Co analysts wrote in a report.

On the HCM City exchange yesterday, the VN-Index gained 0.79 per cent over the previous session to close at nearly 388 points. The value of trades also soared by 72 per cent over Monday's level to VND509 billion (US$24.2 million), while the volume of trades rose by 80 per cent to 39 million shares.

Transactions focused on mid-cap and penny stocks, pushing many to their ceiling prices. Gainers included Becamex Infrastructure Development (IJC), Binh Duong Trade and Development (TDC), Sounthern Rubber Industry (CSM) and Viet Nam Electricity Construction (VNE).

Blue chips were mixed. Real estate developer Hoang Anh Gia Lai and PetroVietnam Finance (PVF) hit the ceiling, but insurer Bao Viet Holdings (BVH), Phu My Fertilisers (DPM) and software giant FPT Corp (FPT) all posted declines between 0.6-1.1 per cent.

Overall, gainers overwhelmed losers yesterday by 149-79.

On the Ha Noi Stock Exchange, the HNX-Index climbed by 2.1 per cent to close at 60.59 points. Both volume and value doubled Monday's totals, with 38.6 million shares traded for a value of nearly VND322.3 billion ($15.3 million) Advancers on the northern bourse outnumbered decliners by 202-55.

Three codes saw activity in excess of three million shares, including Kim Long Securities (KLS), VNDirect Securities (VND) and PetroVietnam Construction (PVX). PVX was the most-active share during the session with 3.93 million traded. It soared to its ceiling price while KLS and VND each closed over 4 per cent higher.

Foreign investors concluded yesterday as net buyers on both exchanges, picking up a combined VND83.9 billion ($4 million) worth of shares.

New index to roll out next Monday

The HCMC Stock Exchange announced on Monday the list of 30 stocks which will be put in the basket to calculate the exchange's new VN-30 Index, the new benchmarch index for the southern bourse which will be applied next Monday, February 6.

The exchange also published the number of outstanding shares and the free floate rate – the ratio between the number of shares freely traded on the market over the total number of outstanding shares – for the 30 stocks. The names of 10 shares on a back-up list were also posted.

On Friday, the exchange will anounce the weighted rate of each of the eligible stocks.

The VN-30 Index will track the 30 leading stocks by both market capitalisation and liquidity, representing about 80 per cent of total market capitalisation and 60 per cent of total market volume.

The stocks in the basket must have a free-float rate of over 5 per cent and no share will be weighted at more than 10 per cent of the index in order to eliminate potential distortional impacts by particularly stocks, with the VN-Index commonly dominated by the so-called "quartet" of insurer Bao Viet Holdings (BVH), food producer Masan Group (MSN), real estate developer Vincom (VIC) and dairy giant Vinamilk (VNM).

The list of eligible stocks will be reassessed every six months.