Real estate market likely to recover later this year

The domestic real estate market is expected to recover in the second half of this year but the recovery will only occur in some segments of the sector, said an official of the House and Real Estate Market Management Department.

Vu Xuan Thien, deputy head of the department under the Ministry of Construction, forecast that in the second half of this year, the market would see a recovery in low and medium-price apartments as well as villas and houses located in suburban regions at reasonable prices.

According to Thien, the second half of the year will be good time for the people to buy property at reasonable prices.

Surges in housing and property prices were less likely, he said.

The existing challenges faced by the property market would remain in the first half of this year, he said, due to the impacts of policies on curbing inflation and stabilising the macro-economy.

Trading activities on the domestic property market have almost stopped, he said, as prices are still extremely volatile. The market has failed to focus on projects that meet the people's demand, especially houses and apartments for rent. Construction of housing or apartment projects is progressing slowly.

Thien said the existing difficulties experienced by the domestic property market are largely a result of a lack of timely guidelines from authorities.

In addition, some property development and trading companies who lack professionalism and adequate financial sources are complicating matters, he said.

Le Thien Linh, head of the General Management Division of LILAMA Joint Stock Company, said difficulties in securing capital have forced his company to focus on manufacturing and construction in stead of property, which has been one of the company's non-core businesses during the past few years.

Meanwhile, few property companies have large enough sources of capital to finance their projects.

Le Thanh Than, director of Lai Chau Private Construction Company, said his firm is an exception.

The company has enough funds for its property projects as it does not rely on banks, said Than, instead using funds from its hotel and tourism businesses to invest in property development.

Gold retreats marginally

Price of gold in Vietnam retreated marginally over the previous day on March 13 while global price inched up a bit, with investors waiting to see if the US Federal Reserve signals another quantitative easing package after its policy meeting today.

Sacombank Jewellery Company bought gold at VND44.65 million and sold at VND44.75 million as of 8.50am Vietnamese time.

Saigon Jewellery Company, Vietnam’s biggest gold processer and trader, collected the metal at VND44.63 million and sold at VND44.73 million as of 9.35am Vietnamese time.

Hanoi-based Phu Quy Jewellery Company purchased SJC-brand gold at VND44.65 million and sold at VND44.75 million as of 11.28am Vietnamese time.

Bao Tin Minh Chau Jewellery Company quoted price at VND43.35 million for buying, and VND43.65 million for selling at 12.35pm Vietnamese time.

Domestically, gold fetched VND1.9 million a tael, higher than global price.

On free market, dollars maintained at VND20,810 per dollar for buying, and at VND20,830 per dollar for selling, unchanged as of the previous day.

Vietcombank also continued to purchase the greenback at VND20,810 per dollar, and sell at VND20,870 per dollar.

Globally, gold declined along with stock markets after economic data from China showed a slowdown in economic growth of the world’s second largest economy.

Gold for immediate delivery fell as much as $12.7 an ounce, or 0.7 per cent, to close at $1,701.8 an ounce in New York.

In Asia, the heavy metal recovered slightly this morning. Spot gold rose $3.3 an ounce to trade at $1,705.1 an ounce at 10am Vietnamese time.

The euro exchange rate against the US dollar was at $1.32 a euro in Tokyo this morning.

Crude oil futures for April delivery gained $0.63 a barrel to trade at $106.97 a barrel on the New York Mercantile Exchange at 10.30am Vietnamese time.

Today, markets will concentrate on Fed’s policy meeting. After recent positive signs of recovery of the US economy, investors concerned about a possibility that Fed would not pump more money into the economy.

Depreciation pressure on the precious metal would increase if Fed does not mention another quantitative easing package in its meeting tonight.

Stocks decline despite rate cut
 
Stocks tumbled yesterday on both of the nation's stock exchanges, even as the central bank announced that it would cut key interbank rates by 1 per cent effective today.

Analysts said that news of the anticipated rate cut wasn't strong enough to buoy the market since the expectation of lower interest rates had already been built into prior gains.

And while the deposit interest rates paid by banks have been capped at 13 per cent per year, most enterprises will still have to borrow at costs of 16.5 per cent per year or higher, still a high rate, said Nguyen Tuan, head of the analysis department of FLC Securities Co, in an interview with the newspaper Dau tu Chung khoan (Securities Investment).

"It will take a longer time to reduce lending rates for businesses because banks need to raise sufficient capital at low cost for lending," Tuan said.

On the HCM City Stock Exchange yesterday, the VN-Index extended last week's decline with a loss of 0.95 per cent, concluding the session at 428.02 points. The VN30 Index, which tracks the performance of the 30 leading shares by capitalisation and market volume, also closed down by 1.95 per cent to 477.54 points.

Decliners outnumbered advancers during yesterday's session by a margin of about three-to-one. Of 190 shares shedding value, 99 plunged to the floor.

Bank shares continued to fall with four out of five listed banks declining. Vietinbank (CTG) dropped to the floor while others declined by 1.2-3.9 per cent. Military Bank (MBB) and Sacombank (STB) led the market by volume with over 7 million shares traded each, but while STB closed up by 4.1 per cent, MBB shares finished down by 3.36 per cent.

As investors became more cautious, market value shrank by 23 per cent compared to Friday's level, totalling VND1.15 trillion (US$54.8 million) on a volume of nearly 74.8 million shares.

On the Ha Noi Stock Exchange, the HNX-Index also slid by 3.21 per cent to close yesterday's session at 69.26 points. Volume fell 15.4 per cent from Friday's session to just 59 million shares, while value of trades dropped by 17.5 per cent to VND551.86 billion ($26.3 million).

Losers outnumbered gainers by 201-83, with PetroVietnam Construction (PVX) becoming the most-active share with 6.2 million traded. PVX closed down 5.1 per cent to VND9,300 per share.

Foreign investors concluded yesterday as net buyers on the HCM City bourse, picking up VND43 billion ($2 million) worth of shares, but they were net sellers on the Ha Noi bourse, responsible for a net sale of shares worth VND16.3 billion ($776,200).

Vietnam, Belgium enhance economic ties

Belgian Crown Prince Philippe, accompanied by executives from 200 businesses, arrived in Vietnam on March 11 for a visit that will last till March 16 to promote trade and economic linkages between the two countries.

The Belgium businesses are engaged in a wide range of fields, including water and waste management, transport, port, logistics, space technology and agriculture.

The Belgian firms, especially export ones, are interested in middle-income developing markets like Vietnam, Benoit Cerexhe, Brussels’ Minister of Economy, said at a press conference in Hanoi on March 11.

At present, import-export turnover between businesses of Belgium and Vietnam in general and between the Brussels region and Vietnam in particular remains modest, he said, expressing hope that the two countries’ trade would grow robustly following the visit.

In 2011, two-way trade between Vietnam and Belgium reached about US$1 billion. Belgium has poured about $108 million in foreign direct investment in Vietnam to date and its businesspeople are very keen on increasing their operations here.

Kris Peeters, Flanders’ Minister of Economy, said the visit will help Belgian firms share experience with Vietnamese partners in various fields, focusing on transport development, logistics and ports, water and waste water treatment, food and agricultural technology and aquaculture and health services.

During the visit, the Belgian businesspeople are expected to take part in workshops, make fact-finding tours to some Vietnamese localities and sign 13 memoranda of understanding with Vietnamese partners.

Vietnam cuts key dong interest rates after inflation slows

Vietnam's central bank cut key rates on dong loans and deposits for the first time in nearly three years, helping ease a burden of high operating costs faced by businesses after inflation eased last month.

The State Bank of Vietnam cut the refinance rate, or the rate at which it lends to commercial banks, to 14 percent from 15 percent, trimmed the discount rate, or the annualized rate used in buying treasury notes from banks, to 12 percent from 13 percent.

The bank also lowered the cap on dong deposit rates banks could charge to 13 percent from 14 percent, and the cap on non-term dong deposits and with terms of less than one month to 5 percent from 6 percent earlier.

The new rates will come into effect on Tuesday, the central bank said in a statement, citing "a declining trend of inflation and supply and demand of funds on the market".

The announcement was in line with market expectation, except for the base rate. Last week Governor Nguyen Van Binh said the base rate, along with the deposit rate cap, would be both cut by one percentage point.

The central bank last cut both rates in April 2009.

Many domestic companies have complained that dong lending rates charged by banks which were as high as 18-20 percent in the past year has hurt their business performance and profits.

The stock index on Vietnam's main market, the Ho Chi Minh Stock Exchange, eased 1.75 percent at 424.56 points at 0430 GMT at midday before news on the rate cuts were published. The index has gained 20.8 percent so far this year.

The rate cuts were announced after Vietnam said its annual inflation rate for February slowed to 16.44 percent from 17.27 percent in January.

Financial experts have also said that a lower credit growth target planned for this year will relieve pressure on banks to raise funds, helping them cut their deposit rates.

The central bank has set credit growth targets for individual banks in Vietnam this year within a range of between zero and 17 percent, after loans rose nearly 11 percent last year from 2010.

Vietnam announces extractive industry study

The Vietnam Chamber of Commerce and Industry (VCCI) and the Consultancy on Development Institute (CODE) has announced a study named, “Extractive Industries Transparency Initiative (EITI) and Vietnam 's Ability to Participate in the Initiative”.

Apart from supervising current documents and policies of the State and collecting other information and expert consultancy in this field, the study publicised its direct interviews with representatives from 21 state management agencies and several enterprises which operate in developing mineral resources and oil and gas.

It also sent questionnaires to 16 other businesses to collect their information and opinion on participating in EITI.

Under the study, Vietnam has built an adequate document system of legal procedures on mining activities and oil and gas exploitation. However, it also showed that there are gaps between legal regulations and reality in management works, between content of documents and implementation of financial obligation in mining activities.

Surveyed state management agencies, exploitation businesses and social organisations agreed that it is necessary to further enhance transparency and information disclosure in this field.

Most related bodies such as the Ministries of Finance, Industry and Trade, Natural Resources and Environment, the State Audit Office and major businesses such as Vietnam National Coal Mineral Industries Holding Corporation Limited and Vietnam National Chemical Group are expecting Vietnam ’s participation in the EITI in order to create a more transparent environment in the mining sector.

The study, “Extractive Industries Transparency Initiative (EITI) and Vietnam 's Ability to Participate in the Initiative” recommended that the EITI implementation should only be conducted in major firms and for the fields of oil and gas, coal and titanium.

Through the study, several businesses said that they are willing to take part in the EITI as this will benefit their business.

The participation scope in the EITI will be expanded to smaller enterprises and other mining activities in the near future, when Vietnam has sufficient experience and ability in implementing the initiative.

Expert calls attention to liquidity shortage

Sky-high interest rates could only be reduced if commercial banks’ liquidity problems were tackled, said Le Xuan Nghia, vice chairman of the National Financial Supervisory Commission.

In the year to date, inflation in the nation has been low, with a rise of just 2.37 percent from late last year compared to an increase of 3.35 percent in the same period last year.

Nghia said yearly inflation was normally twice as high as the first-quarter number.

Nghia thus forecast the inflation rate in 2012 would be much lower than expected, at roughly 6.5 percent.

“The banking system should have pulled down interest rates in line with the falling inflation but they have yet to do so due to the liquidity crunch,” Nghia said.

In fact, larger lenders are holding ample capital as they have invested heavily in Government bonds with terms of less than 5 years to net a coupon of below 12 percent annually, Nghia said.

In related news, Bao Viet Securities Co. reported that the total transaction volume of the whole bond market from February 13 to 17 reached VND1.81 trillion, up 81 percent against the previous week. Notably, the majority of investors joining the market are local credit institutions.

Liquidity woes in reality are only problematic for a number of smaller banks, but this has hampered the economy and the road map to cut rates at the request of the central bank, Nghia pointed out.

He attributed the situation to local residents’ doubt of the effectiveness of macroeconomic stabilization policies and the credibility of the banking system.

Those local lenders struggling to attract depositors tend to reject borrowers to minimize credit risks, he said. Meanwhile, many borrowers have found banking loans out of their reach because of high rates.

As a result, Nghia said, the cash flow has been choked off and has created little added value.

Nghia said liquidity problems wouldn’t be solved drastically within the first quarter but they must be handled thoroughly throughout the year, especially in the third quarter.

Nghia suggested some solutions to improve liquidity at local lenders, including speeding up capital circulation. Capital flow in Vietnam in the period prior to the financial crisis had seen three cycles a year but it fell to 0.8 last year.

To improve capital flow, Nghia suggested the central bank should regulate capital via compulsory reserves and promptly merge weak banks. He even urged the authority to allow some lenders to trade gold deposits on international markets.

The central bank should restructure bad debts as soon as possible since the current capital shortage at local banks has resulted from bad debts, he said.

Steel firms face dumping threat
 
Vietnamese steel exporters have been urged to improve their understanding of trade regulations in import countries to avoid the possibility of anti-dumping cases this year.

Last year, steel exports reached more than 2 million tonnes, earning the country US$2 billion in turnover, according to the Viet Nam Steel Association (VSA).

The result was attributable to the growing efforts by steel companies to seek new export opportunities at a time when supply was exceeding domestic demand, the VSA said.

Despite encouraging export performance, the steel industry still faced three anti-dumping lawsuits last year, including an investigation by the Indonesian Anti-Dumping Committee on Vietnamese cold-rolled steel, a US Department of Commerce (DoC) anti-dumping and countervailing duty investigation on imports of circulate welded carbon steel pipes and another DoC dumping claim over Vietnamese steel-made clothes hangers.

"I think these lawsuits are just the beginning. In the future, when we try to boost steel exports to deal with slumping domestic consumption, we will likely cope with more anti-dumping suits from importing countries," VSA general secretary Dinh Huy Tam told Thoi Bao Kinh Te Sai Gon (Saigon Economic Times).

The steel supply was currently far exceeding demand but there remained a massive influx of investment into the industry. Because the local market scale was small, enterprises had no choice but to promote exports, Tam said.

Steel exporters should gain an understanding of the rules and regulations of import countries, which they had neglected in the past, in order to minimise the possibility of being subjected to anti-dumping duties in the near future, he said.

February's steel consumption volume reached roughly 360,000 tonnes, marking a 50 per cent increase over the previous month, the VSA said.

However, last month's export quantity was still lower than the previous average rate of 400,000-420,000 each month, it said.

The association also predicted that the local demand for steel would remain modest in the coming months as State-invested real estate and infrastructure construction projects were under strict supervision.

The industry currently holds 350,000 tonnes of steel in stock, not including 560,000 tonnes of steel ingots which will be slated for production this month.

Concerns remain among business leaders for 2012

Corporate outlook remains optimistic for 2012 overall, but more companies were concerned that their situation will further deteriorate compared to previous years, according to Nielsen Viet Nam.

The online Nielsen Business Barometer survey – conducted during the last two months of 2011 – was recently released. It found that 29 per cent of firms believed their situation would improve significantly, while 36 per cent expected conditions to remain the same and 28 per cent estimated the situation would deteriorate in the next 6-12 months.

Two-thirds of business leaders still expect double-digit growth in the next 12 months. Compared to the last wave, more companies expect single-digit growth, according to the survey report.

Among the three key factors companies believed were required for growth in the next 12 months, the survey pointed out that "while increasing consumption and expansion still remain a source for growth, business leaders now talk about mergers and acquisitions (M&A) and exports too."

"Leaders will continue to invest in advertising and expanding businesses in 2012, but will do so with even more caution than in past years," stated the report. Business leaders expect Vietnamese consumers to continue to make purchases when there are promotions, but also to cut back on ‘non-essential' items.

In the next 12-18 months, the rural market was predicted to continue to attract business leaders, though to a lesser extent than the first half of 2011.

The survey also asked questions on business leaders' opinions and consumer reactions on 2011. About two-thirds of the leaders felt business conditions in Viet Nam had deteriorated, yet most achieved their targets. However, significantly fewer companies beat their targets in 2011 compared to 2010.

Among the five top concerns, global economic crisis showed up for the first time. The lingering instability in Europe, North America and the growth challenges facing Viet Nam brought back a cautious outlook among business leaders and consumers.

Inflation remained a top burning concern among businesses, with more than 59 per cent of business leaders worried about it.

Competitive pressure, the dong devaluation and wage growth were also listed among the top concerns of business leaders with 41, 41 and 24 per cent expressing worries, respectively.

Leaders recognised that consumers were becoming more discriminating and had an allotment of choices. Therefore, price increases must be carefully planned. Furthermore, more than half of those surveyed said they would look at improving productivity as a solution to inflation.

Garment makers prepare to deal with tough year

The garment and textiles industry is facing a hard year, with the global economy remaining insecure and major importers cutting back, warned experts.

The country's major importers such as the US, the EU and Japan will continue to tighten monetary policies and cut spending, according to Dang Phuong Dung, general secretary of the Viet Nam Textiles Association.

Dung said that since Viet Nam became an official member of the World Trade Organisation (WTO) five years ago, the domestic garment and textiles industry along with other economic sectors had made flexible changes to adapt to new conditions.

The garment and textiles industry was seeing the fastest and most stable growth for many years, and was an industry that Viet Nam had many advantages in, she said.

Viet Nam had broken into the list of the top 10 exporters of apparel in the world. Export turnover last year reached US$15.8 billion and maintained impressive growth of 25 per cent against 2010.

The country was now the second largest exporter of apparel to the US market with $6.87 billion in 2011, equivalent to a 12 per cent year-on-year increase. The world's second largest importer – the EU – contributed $2.5 billion to Viet Nam's garment and textiles industry last year, rising 33 per cent over 2010. Exports to Japan also brought a turnover of $1.86 billion with growth of 45 per cent, she said.

Vietnamese garment and textile products are now present in 180 markets worldwide, with major markets including the US, the EU, Japan, Canada, South Korea and Australia.

After joining the WTO, Viet Nam had better conditions to integrate into the world economy and attract foreign investment, develop the domestic economy, promote local production and improve the investment environment.

The country is committed to expanding its market, reducing tariffs and removing other trade barriers, especially apparel tariffs.

Economists have predicted that this year and the following years would be extremely difficult, as importers will continue to cut spending on garment and textile products. It was reported that in the remaining months of last year, local garment and textile exports were in decline both in turnover and orders.

Many businesses, especially small and medium enterprises, reported that in the first quarter of this year, they were struggling to secure orders for their Q3 and Q4 production plans.

It is forecast that competition on the world garment and textiles market is going to heat up, with many countries making efforts to raise quality.

In addition, the US and the EU have allowed China to abolish garment and textiles quotas. As a result, Viet Nam will face more competitive pressure from China and other Asian countries like India, Pakistan, Bangladesh and Sri Lanka.

General director of Garment 10 Nguyen Thi Thanh Huyen said Bangladesh and Cambodia had been granted zero per cent export tariffs to the EU market, and Myanmar was soon to follow. As a result, Viet Nam would see fierce competition from these countries.

Vietnamese apparel companies would have to manufacture high-quality, well designed products while closely managing the production process to compete with its rivals.

Domestic companies should closely monitor any changes in major importers and seek other opportunities in potential markets like Canada, Turkey, the Middle East, Russia and Eastern Europe in order to increase their export turnover, said Huyen.

Textile industry buzzes with acquisitions

Several textile and garment firms have seized opportunities in this difficult economic situation by taking over inefficient factories.

Nguyen Thi Thanh Huyen, general director of Garment 10 Joint Stock Company (Garco 10), said the company last year acquired machines of a German firm and started operation in October.

According to Hoyden, the German company had developed its production facility, but encountered financial problems, could not hire workers and was forced to sell its factory.

Garco 10 thus took over its production line at a price 30 percent lower than market prices. Its made-in-Europe machines are also of fairly good technology.

Other members of the Vietnam National Garment and Textile Group (Vinatex) have also taken over several local enterprises.

Le Trung Hai, deputy general director of Vinatex, said last October his company acquired a 60 percent - 70 percent stake in a Khanh Hoa-based textile company.

Last September, Hung Yen Garment Joint Stock Company also spent US$1 million to acquire South Korea-invested Gunyong Garment Co. in Hung Yen Province.

Gunyong Garment had 8 production lines that required 500 laborers, but operated inefficiently and lacked workers.

The company’s owner thus decided to transfer the entire production facilities to Hung Yen Co. and switch to investing in Myanmar.

Earlier in July 2011, Vinatex also acquired Dai Cat Tuong Garment Company in Quang Ngai for over VND39.8 billion at an auction.

Despite a healthy US$15.6 billion in export turnover last year, the apparel sector may face uncertainty in 2012, industry insiders said.

The apparel sector ranks first out of the 23 groups of exports that generate over $1 billion each year.

In 2011, textile and garment products contributed a hefty $14.03 billion to the $15.6 billion, a surge of 38 percent year-on-year, while fibers brought in nearly $1.7 billion, rising 25 percent and 26 percent respectively.

High growth rates were recorded in major export markets such as Japan, South Korea and the European Union, as well as some other new markets.

Textile and garment companies like Garment 10 and Viet Tien continued to aim at stability and quality to satisfy the demand of traditional markets such as the EU, the US and Japan.

In addition, many enterprises made good use of preferential tariff agreements, especially the incentives from South Korea, as exports to this country jumped from $4.6 billion in 2010 to $6.5 billion last year.

The apparel industry is looking to obtain export turnover of $16.5 billion this year, or a rise of 19 percent against 2011.

However, several shirt and trousers exporters have witnessed their contracts cancelled and have no new orders for the first quarter of 2012 due to the global economic woes.

Used car business seen picking up

Auto manufacturers and traders have opened more used car dealerships in anticipation of high market demand.

The used car market is characterized by haphazard development with buyers often placed in a disadvantageous position due to lack of guarantees and warranty. So several companies have entered this market segment in a more professional way by offering vehicle inspection and after-sale services.

Used car dealerships are aware that newly licensed drivers tend to buy old cars as they are afraid of owning new cars due to potential crashes, paying a high price for a brand new car or servicing a loan with a high interest rate.

Automakers consider secondhand-car business a chance of selling new cars as there are many car owners wishing to exchange for brand new models but they do not know how much their own cars cost.

Toyota Motor Vietnam (TMV) will expand its used car business in the country with a series of used car outlets to be established at its dealerships nationwide after the opening in mid-2010 of the Used Car Center at Toyota East Saigon Joint Stock Company.

Nguyen Khoa, director of the used car center, expressed optimism about the future growth of the secondhand car market, especially at a time when new vehicle registration fees are getting higher. Its business has grown 20% since the center’s launch, he said.

In his observation, the demand for used cars in HCMC is surging as more youngsters are learning to drive and old vehicles can be immediately put into use without having to wait for the number plate and registration.

Despite forecasts that auto sales in the country this year would continue to dip, Khoa believed the used car segment could edge up an impressive 15-20%.

TMV’s used cars can still compete well with cheap cars made by South Korean firms, Khoa said.

Though Mercedes-Benz Vietnam is known as a luxury car maker in Vietnam, it has recently joined the used car segment by launching Mercedes-Benz Auto Service and Trade Center on Vo Van Kiet Boulevard in HCMC’s Binh Tan District. The new facility was invested by its dealer Hang Xanh Motors Service Joint Stock Company (Haxaco). This center is the only service facility in the country where used Mercedes-Benz autos are traded.

Earlier, Audi Vietnam and Euro Auto, distributors of BMW, also launched their second-hand car services. Meanwhile, Anycar Vietnam is developing a network of certified pre-owned car outlets selling all locally assembled auto brands.

Auto traders see the used car market full of potentials because there are numerous average-income people in need of secondhand vehicles. However, inspection and warranty services for used cars are still absent, thus vexing buyers.

Those seeking to buy used cars often ask technicians or people with good knowledge of autos for help; otherwise, they may buy malfunctioning vehicles. Therefore, seeing this matter, auto manufacturers and traders are willing to provide car inspection and warranty services to increase their competitiveness.

Used cars supplied by TMV sales agents to the Used Car Center at Toyota East Saigon must be checked and evaluated by Toyota engineers. Vehicles meeting the requirements will be granted quality certificates. Especially, customers are offered after-sale services with qualified warranty and maintenance.

As a pioneer in the used car market, Ford Vietnam said the quality of used vehicles must be tested through an assessment of 162 parts. This way makes it possible for specialists to exactly assess the state of the car and repair it if necessary to ensure the best operating conditions possible before delivery to consumers.

Similarly, a representative of Anycar said used cars would be strictly inspected and granted quality certificates before they were put up for sale. The firm will not sell disqualified vehicles.

Meanwhile, Haxaco of Mercedes-Benz Vietnam provides warranty of one year or 20,000 kilometers for cars that have been in use for up to five years or 100,000 kilometers since their first registrations. Customers will be given vehicle history, engine performance certificate and others.

However, some traders said vehicle inspections might push up prices of used cars. The best selling used cars are those priced from VND400-600 million per unit.

Agriculture spearheads growth

Agricultural restructuring is essential to Viet Nam's economic and social development, a conference heard yesterday.

Speaking at the event, based on the national agricultural outlook for this year, Dr Nguyen Do Anh Tuan, director of the Centre for Agricultural Policy, said that although the sector experienced growth of 4 per cent last year, market movements were forecast to be complicated this year.

Due to financial difficulties, the sector would face decreased demand from import countries. Moreover, Viet Nam would also have to compete with an increased number of producers such as Ethiopia (coffee), South Africa (rice) and Myanmar (aquaculture products).

Epidemics such as foot-and-mouth disease, blue eared pig disease and bird flu, would also continue threatening productivity, Tuan said.

Dang Kim Son, general director of the Institute of Policy and Strategy for Agriculture and Rural Development, said that key commodities such as rice and coffee were still experiencing unstable supply due to farmers focusing on short-term markets alone, suffering big losses as a result.

"This situation must improve in order to maintain agricultural growth and sustainable development," he said.

Representatives at the conference agreed that restructuring the agricultural sector would be a good solution to the issue.

Alongside that, a linkage between companies and farmers, the promotion of public private partnerships, a connection between associations to assure quality standards and increased storage facilities were considered integral to the process.

Today, experts from domestic and international research organisations and relevant authorities will continue discussing the outlook of rice and coffee exports, farmer welfare improvements and the policy for agricultural value chain development.

Viet Nam's agriculture sector forms a large part of the national economy with a growth rate of 4 per cent and earnings of US$25 billion, accounting for 22 per cent of total export turnover. Agriculture was the only sector to achieve a net export surplus of $9 billion last year.

The two-day conference was held via collaboration between the Institute of Policy and Strategy and Rural Development and the Viet Nam Chamber of Commerce and Industry.

Paddy prices in free fall despite stockpiling scheme

Local farmers have cast doubt on a plan of the Vietnam Food Association (VFA) to stock up on paddy (unhusked rice), citing the continued free fall of paddy prices in the Mekong Delta.

After over a week of staying at VND4,400-4,500 and VND5,400-5,500 for a kilo of fresh and dried low-grade paddy IR 50404 respectively, the prices have continued shrinking sharply. Traders at wholesale markets in Tien Giang Province reported paddy had dropped by VND300-400 per kilo, with the fresh IR 50404 priced at VND4,000-4,200 a kilo and the dried IR 50404 at VND5,000-5,150.

Despite positive news on Jasmine and high quality rice export, the prices of these paddies also went down by VND100-300 a kilo early this month. Traders have bought one kilo of the high-grade OM 4900 at VND5,500-5,600 compared to VND5,700-5,800 for the fresh paddy and VND6,400-6,500 for the dried type on February 29.

Nguyen Van Quyen, a farmer in Phu Cuong Commune in Tien Giang’s Cai Lay District, said he felt secure when hearing about the paddy stockpiling program but given the current price plunge the program should be called into question.

The price of the unprocessed rice grown from IR 50404 grains has tumbled to a mere VND6,700-6,800 a kilo versus VND6,800-6,950 on February 29. Meanwhile, the unprocessed rice cultivated from long-grain rice types such as OM 4218 and OM 5451 slid by VND100-150 to VND6,900-7,000 per kilo.

Rice prices in Ba Dac wholesale market in Cai Be District and Tan Binh Commune in Cai Lay District are quoted at VND7,900-8,100 for a kilo of IR 50404 and VND8,800-8,900 for a kilo of OM 4900.

Local farmers are still unable to sell paddy though the prices are down to their lowest since the beginning of the winter-spring crop.

Nguyen Van Tien, a farmer in Thanh Loc Commune in Cai Lay District, complained no traders wanted to buy paddy he would harvest from one hectare of IR 50404.

Similarly, Nguyen Van Dung in Tan Hoa Commune in Tan Thanh District in Long An Province has failed to persuade traders to buy his fresh paddy harvested from 1.5 hectares of IR 50404. After all, he has had no choice but to keep the paddy.

Traders at Ba Dac wholesale market attributed the present poor paddy demand to the prevalent see-and-wait attitude.
 
Farms have difficulty seeking aid

The Government has adopted multiple policies to prop up farms but farmers have still found it hard to gain access to much-needed financial support.

A meeting between the Vietnam Association of Rural, Farmer Entrepreneurs and Farm-owners (VARFEF) and authorities heard several suggestions on how to help farm owners and agricultural enterprises benefit the government pro-farm policies, particularly Decree 61/2011/ND-CP.

Le Duy Minh, owner of an afforestation farm in Binh Phuoc, said he and many other farm owners could not benefit from the agricultural support policies detailed in Government Decree 61 and the Ministry of Finance’s Circular 84 due to little or no knowledge of administrative procedures.

The same thing has happened to Nguyen Van Minh from Huu Tin Company, specializing in growing oil plants and herbs in Ba Ria-Vung Tau and Khanh Hoa. Though Decree 61 took effect on July 25 last year, he has not been able to receive financial aid as stated in the decree as he was uninformed of necessary administrative procedures.

Nguyen Van Bay, vice principal of College of Management for Agriculture and Rural Development 2 (CMARD 2), said that while he was giving guidance for many farms to do the paperwork, he found that the finance ministry’s Circular 81 and Circular 06 of the Ministry of Planning and Investment had several overlapping procedures. Therefore, without appropriate legal advice, financial incentives will get out of farm owners’ reach.

According to a representative of the Department of Crop Production under the Ministry of Agriculture and Rural Development, farms cannot access low-cost funding sources as specified in Decree 61 because they do not know which procedures to complete and which agencies to work with.

Therefore, the department suggested VARFEF should establish a division specializing in giving guidelines on administrative and legal procedures so as to help reduce farms apply for financial support from the government.

However, Bay of CMARD 2 said the financial aid for farms is actually sourced from the provincial budgets, not the State’s. Meanwhile, many localities are heavily dependent on annual allocations from the State budget, making it harder for farms to approach financial assistance.

Bay mentioned the possibility that a farm fully meets the requirements of Circular 84 and 06 but the locality runs out of cash.

Local currency gains in strength

Properly explained and enforced policies, together with drastic measures to curb dollarization, have helped to strengthen the local currency.

The downward pressure exerted upon the Vietnam dong from 2008 to 2011 was ascribed to the country’s significant balance-of-payments deficit, lackluster foreign reserves, soaring inflation, appalling financial policies and sour sentiments among market players.

This trend has been reversed recently, with the buying and selling prices of the greenback hovering about VND20,750 per dollar and VND20,850 per dollar at the moment.

Experts have pointed out several causes, including a more narrow trade deficit, rising remittances and emphatic gestures from the State Bank of Vietnam (SBV).

Demand for dollars has dropped as Vietnam’s trade deficit has ebbed, hitting a 5-year low of $9.5 billion in 2011.

In fact, the trade deficit as a share of export earnings last year was the smallest in 2002-2011.

Though this was encouraging, inbound shipments of production inputs, which took the lion’s share of Vietnam’s important profile (90.6 percent in 2011), dropped.

According to the General Statistics Office, production inputs also experienced a dramatic drop in January 2012, 86.2 percent (vehicles and parts), 56 percent (cotton), 51.8 percent (cooking oil and fat), 53.5 percent (most ordinary metals), 30.9 percent (fabric) and 20.6 percent (materials for apparel and footwear).

Demand for dollars has therefore fallen since the second half of 2011.

Controlling exchange rate fluctuations.

Nguyen Van Binh, governor of SBV, succeeded in keeping exchange rate fluctuations in 2011 within 1 percent as he promised on September 7, 2011.

Consequently, confidence has returned. In early 2012, Binh said in the absence of internal and external shocks, the Vietnam dong/US dollar exchange rate would not change by more than 3 percent.

Binh’s statement is supported by such factors as escalating remittances, sinking trade deficits and high interest rates for dong deposits.

Over the past few weeks, many enterprises and individuals have sold dollars to banks, causing the price at which banks buy the greenback to dip from VND20,930/US dollar to VND20,750/US dollar.

Many people are also continuing to sell foreign currencies to increase their dong deposits, which are offered an interest rate of above 14 percent per annum.

This is further strengthening the dong.

Remittances were on the rise in 2011, reaching $9 billion and offering a good source of foreign currencies for exchange rate stabilization.

In previous years, when exchange rates in the free market were higher than at banks and control of foreign currency trading was not yet tightened, the flow of remittances into banks was extremely limited.

The gap between unofficial and official exchange rates has been reduced substantially.

This, coupled with the harsh penalties imposed on those breaking foreign currency trading rules (VND300-500 million), has paved the way for remittances to flood into banks instead of the realty sector (as they did in 2009 and 2010).

Yet, some are worried that if the current exchange rate persists in the long run, Vietnamese goods will be less competitive.

In fact, some economists have likened Vietnam’s latest approach to exchange rate management a double-edged sword.

That said, exchange rate adjustments this year, if any, will probably be within 3 percent.

Existing circumstances make it easier for SBV to widen the trading band for the dong this year.

It is likely that exchange rate management policies in the future will be in line with inflation control and dong interest reduction.

In late 2011, Tai Hui, regional head of economic research in Southeast Asia at Standard Chartered Bank, forecast that Vietnam’s exchange rate would hit VND21,400 per dollar in the first quarter of 2013 and VND22,000 per dollar in the third quarter of the same year.

If this prediction is true, SBV is likely to start its exchange rate adjustments at the end of the first quarter of 2012.

However, the prospect of such changes is unlikely to stop people from selling dollars for the dong at the moment.

March CPI to rise 1 percent: Ban Viet Securities

The consumer price index (CPI) of Vietnam in March is expected to rise 1 percent, said Ban Viet Securities Co. (BVSC)

“The direct impact on CPI from the recent gasoline hike is about 0.37 percent, though the full impact on CPI will not be felt until April,” BVSC said in its Thursday report for stock investors.

Although there are only a few days left in March that would be included in the calculation for March, “we are not quite optimistic about the March number,” it said. The General Statistics Office of Vietnam (GSO) collects data on the 5th, 15th, and 25th of each month to calculate the CPI.

“Even though prices of some food and foodstuff have weakened after Tet, we still believe inflation is likely to top 1 percent month on month for March.”

“Accordingly, we expect the year-on-year figure to come in around 15.2-15.3 percent vs. 16.4 percent in February.”

Previously, many experts had forecast the CPI to slow to 0.4-0.5 percent In March, driven by a fall in prices of food, low purchasing power and low input material costs, according to Sai Gon Giai Phong newspaper.

Prices of food are expected to ease in March, though the price of chicken may be increased in some localities due to widely spreading bird flu diseases.

Prices of wholesale sugar may edge down, while the retail sugar prices are predicted to be stable thanks to the expected sugar production of 25,000 tons in the month.

But the prices of milk will remain at a high level.

Rice prices are predicted to be stable in March as the government’s scheme to buy rice harvested during the Winter-Spring crop for temporary storage has been kick started, while the export prices for high quality rice will be stable or slightly increase due to the effect on the world market.

Domestic fertilizer prices have been kept stable in the last few months and are expected to remain stable in the near future due to low demand in the Mekong Delta, Vietnam’s main rice-growing area.

Prices of construction materials are also expected to stay stable due to low consumption.

Prices of cement are stable despite the high stockpile. The price of domestic steel was decreased by VND50,000-120,000/ton in February.

Vietnam's inflation hit 18.13 percent last year. The government has targeted inflation of between 9 and 10 percent in 2012.

UN releases Industrial Development Report 2011

The UN Industrial Development Agency (UNIDO) and the Ministry of Trade on March 7 jointly released the Industrial Development Report 2011 (IDR 2011).

The report, themed “Industrial energy efficiency for sustainable wealth creation: capturing environmental, economic and social dividends” was carried out in Vietnam, with comparisons to ten Asian countries. The report is announced every two years.

UNIDO Managing Director Wilfried Luetkenhorst said the efficient use of energy is an important factor for achieving sustainable industrial development, along with overcoming major challenges that countries worldwide are facing in ensuring green growth, food production and security and coping with climate change.

Developing countries’ energy spending makes up 55 percent of the world’s total of almost 1 trillion USD per year. Industries make up 25 percent of the world’s total greenhouse gas emissions.

IDR 2011 pointed out many challenges to investment in the use of energy saving technology, particularly the existing energy policy prioritizing cheap energy.

UNIDO put forward six proposals to developing nations for energy efficiency, suggesting Vietnam draft laws and regulations to eliminate plants using backward technology to cause energy waste and environmental pollution and devise a specific timeframe on efficient energy use.

Vietnam also needs to have funds and suitable policies to assist research and technology transfer in energy efficiency, particularly energy price policy for efficient use, said the UN organization.

Addressing the report launch ceremony, Deputy Trade Minister Tran Tuan Anh welcomed the UNIDO initiative to encourage energy efficiency, especially the establishment of an international cooperative mechanism to transfer efficient energy technology from developed countries to developing countries, including Vietnam.

The efficient and economical energy programme goal for 2011-2015, to reduce energy consumption by 5-8 percent, is an ambitious objective given the existing backward technology, he said.

He said the ministry will consider the UNIDO’s proposals on implementing policies suitable for energy efficiency.

Binhanfishco to sell properties for debt repayment

Binh An Fishery Joint Stock Co (Binhanfishco) is considering selling its properties, and even the luxury car Rolls-Royce Phantom, for debt repayment, said the company spokesperson.

“We are selling two properties on Nguyen Van Troi and Cao Thang streets in Ho Chi Minh City,” said Tran Van Tri, acting general director of the company.

Tri has just been appointed as the acting general director to replace his wife, Pham Thi Dieu Hien, who has flied to Singapore for a cancer treatment, bringing with her some $20,000.

“More bank lending should be approved by the senior officials,” he said.

“We owe local famers about VND264 billion and will try to pay partially for some farmers by the end of this month,” said Tri.

"Many people said that my wife was trying to dodge the debts in many different ways. That's just rumors damaging the prestige of my family and Bianfishco," he said.

Binhanfishco has to borrow more than VND62 billion to repay the VND62 billion debt to Asia Commercial Bank.

If possible, it will mortgage the seafood processing plant to Agribank for an immediately loan so that it can repay all the debts to farmers.

The company has signed a deal to sell $80 million worth of stakes to a foreign partner that previously planned to buy up to $120 million.

It has two export contracts to Japan and US totally worth $32 million.

“Too much information about us and the company showed by the press has raised the concerns of our workers, thus discouraging our partners from signing more deals and banks from more lending,” Tri said.

Binhanfish worked well in the first 3 quarters of last year, said the spokesperson Nguyen Dinh Cuong.

Financial difficulties only arose in the last quarter when many banks withdrew their lending at the same time, he added.

The company has asked the workers to stop working temporarily after paying their January wages.

Regarding the rumored debt amounting to VND1.5 trillion, Tri said he would have to check the information before giving any confirmation or comments.

Tri said he just knew about the VND62 billion debts to ACB, and some banks have sent official documents asking for debt repayments.

When asked about the recent widely known wedding for Tri’s son, Tri said all the luxury cars belong to his relatives and friends.