Vinalines posts first-half losses
 
The Viet Nam National Shipping Corporation (Vinalines) recorded a loss of VND660 billion (US$32 million) in the first half of this year, the first time ever in its 15 years of operation, said General Director Nguyen Canh Viet.

Viet said that his corporation had lost revenue despite the fact that its three core services - marine transport, ports and logistics - had experienced an increased revenue of 5 per cent to $492 million in Q1.

Trade experts attributed the losses to the sharp decrease in freight rates, high fuel and interest rates, fluctuation of exchange rates and inadequacies in the mass development of vessel fleets at the same time. As a result, Vinalines' loss was inevitable, they said.

Vinalines holds 70 per cent of tonnage of the nation's vessel fleet. In 2009, the marine transport market got the lowest rates within 20 years, but Vinalines still generated a profit of VND300 billion ($14.5 million).

Of the VND660 billion in losses, Vinalines' business accounted for VND507 billion, and five businesses transferred from the Viet Nam National Shipbuilding Industry Group (Vinashin) suffered a loss of VND153 billion.

The highly anticipated joint ventures between Vinalines, Sai Gon Port and foreign partners, including newly-operational SP-PSA International Port Co Ltd and Cai Mep International Port Co Ltd (CMIT), also reported a loss of VND400 billion ($19.4 million).

SP-PSA International Port Co Ltd attributed the loss to low container service charges at the Cai Mep-Thi Vai, which were not managed effectively by authorities of the ports.

Vinalines, as well as many major carriers around the world, was victim of an investment bubble on fleet development based on a virtual index of demand and freight charges over the last five years, said Bui Quoc Anh, Deputy General Director of Vinalines.

The pressure on shipping companies was great, due to the lending interest rate of 21-22 per cent a year. The interest payment is high for an investment of between VND30 to 40 billion ($1.5-1.9 million) on a 20,000DWT vessel, and did not even include the lease term of partners' vessels below the production prices, said Tran Thien, Director of the Bien Dong Marine Transport Company.

To help Vinalines resist and overcome the difficulties, Viet said the Government had allowed the company to increase its charter capital from VND8 trillion ($388 million) to VND12 trillion ($582 million) and had asked the Finance Ministry to up financial assistance from VND1 trillion to VND2 trillion ($48.5-97.1 million).

To minimise losses by late 2011, many marine transport enterprises have conducted solutions to raise their service quality and restructure their fleets.

However, these solutions depend greatly on the recovery of the local and foreign maritime transport markets. Vinalines has predicted that marine transport market in Q3 would fall sharply before recovering slightly in Q4 this year.

In such context of a dismal marine transport market, selling old vessels to restructure was very difficult. Furthermore, many businesses either did not have ships or continued suffering loss in the last 2 to 3 years thus forcing them to sell their fixed assets, Thien said.

MICE tourism lacks confident approach

A lack of confidence is one of the factors preventing MICE (Meetings, Incentives, Conventions and Exhibitions) tourism from fully exploiting its development potential in Viet Nam, foreign and local experts agree.

Though this form of tourism has seen rapid growth in recent years, it has not matched that of regional countries, although it has all the conditions to do so, they say.

Viet Nam's position is in no way inferior to countries with significantly developed MICE tourism sectors in the Southeast Asian region like Thailand and Singapore, they were cited as saying in a report carried by the Vietnam Investment Review.

MICE tourism would bring benefits many times higher than other forms of tourism, said Gilbert Whelan, former president of the Pacific-Asia Travel Association and director of MICE Club Viet Nam.

European MICE tourists spent an average of US$700-$1,000 a day while MICE tourists from Asia spend $400 a day, he said.

"The number of MICE groups visiting Viet Nam has reached a modest level and does not correspond with the country's inherent potential.

"The country's advertisements in MICE tourism and general images of tourism fail to show signs of confidence," he said.

According to most travel companies, international MICE tourism has not taken much interest in Viet Nam because of a lack of four- and five-star hotels, cultural performance centres, shopping venues and special souvenir shops.

Another reason was that the country did not offer systematic training for MICE industry professionals, said Nguyen Thi Tuyet Mai, Public Relations director for Fiditour travel agency.

Nguyen Ba Vinh, senior consultant of the Minh Vi Exhibition and Advertisement Services Co Ltd, which represents the Thailand Convention and Exhibition Bureau (TCEB) in Viet Nam, suggested that firms involved in MICE tourism co-operate with each other to promote Viet Nam as a destination with distinctive features and products that set it apart from other countries.

"Thailand expects to receive 720,000 MICE tourists this year, with estimated revenues of $1.9 billion. It is a model that Viet Nam should follow," Vinh said.

According to the Viet Nam National Administration of Tourism, 25 per cent of the 5 million international visitors last year were MICE tourists.

Popular MICE tourism destinations were HCM City, Ha Noi, Da Nang, Hue, Nha Trang and Phu Quoc.

Vietcombank, insurer sign deal

Vietcombank and Liberty Insurance Ltd have officially launched an online premium collection service allowing Liberty's customers to pay their insurance premium online once they register for Vietcombank's internet banking service.

The Ha Noi-based bank has so far offered online services to help its customers pay securities and telecom fees.

Securities company debuts

Xuan Thanh Securities made its debut earlier this week after it was renamed from Thai Son Insurance Company

Under the new licence granted by the Ministry of Finance, with a charter capital of VND300 billion (US$14.3 million), the company will offer insurance products, investments activities and others services.

HDBank offers preferential loans

The Housing Development Commercial Joint Stock Bank (HDBank) recently launched a programme offering preferential loans to businesses operating in supported industries.

Accordingly, business plans geared towards motorcycle and automobile manufacturing, informatics and electronics accessories, household appliances, garment and textile and footwear can receive preferential loans from HDBank with up to 4 per cent lower interest rates against ordinary loans.

Agricultural website to be launched

The HCM City Department of Agriculture and Rural Development has co-operated with the Investment and Trade Promotion Centre to launch a website on agricultural products for export.

Beside information of agricultural products and their export markets, the website http://www.tuvannongnghiep.com.vn includes background on traditional and potential markets for Vietnamese farm products.

Eximbank makes world rankings

The Banker magazine of the Financial Times Ltd announced earlier this week that the Viet Nam Export Import Bank (Eximbank) ranked among the top 25 banks of highest asset growth in the world.

Moreover, Eximbank Viet Nam was also rated among the top 1,000 of the world's leading banks, based on the chart of Banker magazine.

The chart recognises achievements of the world's leading banks and uses evidence to show the profitability and the robustness of the banks. It was first used in 1970 and is presented annually in July.

Taiwan handbag-maker builds plant

Yamani Dynasty Co Ltd has been licensed to build a plant producing leather bags, wallets and belts in Nam Hong Industrial Zone, Nam Dinh Province.

The scale of the project is set to produce nearly 1 million leather goods each year.

Once finished on July 7, 2012, the factory will create jobs for over 1,000 local workers.

Binh Phuoc gets new tyre factory

Thanh Do Corporation has been granted an investment licence to build an automobile tire factory worth US$120 million in Nam Dong Phu Industrial Park, Dong Phu District, Binh Phuoc Province.

Accordingly, the factory will use Japan and Italy construction technology in an area of approximately 50-ha.

It will offer jobs to 1,200 local workers when it is completed next year.

Binh Duong records high export rate

In the first seven months of this year, the southern province of Binh Duong's export turnover reached almost US$5 billion, an increase of 20 per cent compared to same period last year.

Textiles, wood products and footwear are among the major exports; textile and furniture fetched $700 million and footwear managed $430 million.

Moreover, from the beginning of this year, the province gained a surplus export value of nearly $600 million.

‘Small-scale' farms set to mushroom
 
Present mushroom cultivation was not comm-ensurate to the country's potential and demand, according to Dinh Xuan Linh, director of the Agricultural Genetics Institute's Biotechnology Centre.

"The mushrooms growing in Viet Nam are still found scattered and at the small scale of household or farm production," Linh said.

The country's total output of both edible and medicinal mushrooms only reaches 250,000 tonnes, with an export turnover of US$60 million per year.

Meanwhile, with the abundance of mushroom growing materials, including straws, logs and enriched sawdust, which can reach 40 million tonnes per year, Viet Nam has a great potential for the development of the mushroom industry.

Linh said if only 10 – 15 per cent of the available mushroom growing materials were used up, about 1 million tonnes of mushrooms still would be produced, with hundreds of thousands of tonnes of organic fertilisers.

The large amount of straw burned after harvests every year was a waste of materials and also causes pollution, he added.

Scientists agree on the necessity of developing mushroom cultivation in Viet Nam. It not only helps produce clean food, create jobs, reduce poverty but also helps reduce environmental pollution.

According to Linh, growing mushrooms should be an affordable investment for farmers. With an investment of VND20 million (US$967) and 100 square metres of farming land, a farmer can earn about VND1.5 – 2 million ($73-98) per month on average.

According to the Ministry of Agriculture and Rural Development, some kinds of mushrooms can be harvested after only two weeks, which brings high economic benefits.

Researches of edible and medicinal mushrooms started dozens of years ago to select spawns, which can be adapted to the climate conditions of Viet Nam, with high yield and quality, said Linh.

In addition, advanced techniques related to breeding, processing and preservation of mushrooms has helped increase mushroom productivity from 1.5 to three times what it was ten years ago.

The Biotechnology Centre was one of the pioneer centres for conducting research on new mushroom spawns, Linh added. The centre has been producing mushroom spawns of about 300 tonnes per year

To date, the technology of growing and processing mushrooms has been transferred to more than 40 provinces throughout the country, he added.

Mushrooms are reportedly grown in Cuu Long (Mekong) Delta and the southern provinces, including Dong Thap, Soc Trang, Tra Vinh and Can Tho City.

However, a lack of research centres with poor technologies for mushroom processing and preservation cause a hindrance to growth, according to Linh.

In addition, Vietnamese mushrooms have not been recognised in the world market, which required the Government's support to boost the development of mushroom cultivation, he added.

Mushroom cultivation has been industrialised and become an important economic sector in some of Asian countries, including South Korea, Japan and Taiwan.

Nestle invests $270 mln in Vietnam coffee factory

Nestle, the world's biggest food maker, said on Tuesday it was investing $270 million in a factory in southern Vietnam, as it seeks to expand its presence in the world's top robusta coffee-producing nation.

The factory in Dong Nai province, Nestle's fifth in Vietnam, would start production in 2013, making coffee products for local consumption and export, the company said in a statement sent to Reuters.

It said the investment of 230 million Swiss francs, was part of a 350 million francs plan launched last August covering Nestle's pledge to sustainable coffee farming, production and consumption.

Under the plan, Nestle would raise its coffee volume bought directly from Vietnamese farmers to 30,000 tonnes a year over the next five years, it said.

Nestle has said it has been buying between 20 and 25 percent of Vietnam's total coffee exports annually, mainly via trading companies.

The group's purchase would be at least 230,000 tonnes this year, as Vietnam -- the world's second-biggest coffee producer after Brazil -- is projected to export 1.15 million tonnes, or 19.17 million bags.

Hanoi firm caught selling pills with fake US label

A Hanoi-based company has been found to be buying food supplements from a domestic source and putting fake labels on them to purport they are imported from the US.

The city economic police and market management unit inspected Takeda Vietnam Co Ltd on Nguyen Hong Street, Dong Da District, and found nearly 100 cartons of nutritional supplement with labels reading glucosamine, Arginine, and Ginkgo Biloba as well as two packaging and labeling machines.

They also seized thousands of nutritional supplement pills that later proved to be of lower quality than claimed on the labels.

Takeda Vietnam confessed to buying the products from the northern province of Hai Duong and managing to sell 20 cartons every day.

In a similar crackdown in late June authorities seized from Hoang Gia Corporation thousands of nutritional supplement pills produced in China but with US labels.

They included Liquid Calcium plus Vitamin D3-Allnature and Super Omega3 Fish Oil Epa/DHA allnature.

They were also of lower quality than claimed.

44 rice producers get export licenses

Rice export licenses have been issued to 40 domestic and four foreign companies, the Ministry of Trade said.

The government made licenses mandatory starting October in a move late last year to prevent speculation.

Now anyone can export rice as long as they complete normal customs procedures.

To get the license, a producer must have a warehouse of at least 5000-ton capacity, a processing plant with a minimum capacity of 10 tons of rice an hour, and other requirements.

The ministry said it expects to grant 70 to 80 licenses before the deadline.

Meanwhile, the Vietnam Food Association said 4.7 million tons of the grain have been exported this year for US$2.2 billion, a 17 percent increase in volume and 27 percent increase in value year-on-year.

Total exports this year are likely to be 6.5 million tons, a 17-percent rise from last year.

Pepper turnover nothing to sneeze at

Vietnam exported 20,000 tonnes of pepper in July, taking the year-to-date volume to 82,000 tonnes and earnings to US$446 million.

The volume was down from the same period last year, but the turnover was higher than the full-year figure of $421 million in 2010, the Vietnam Pepper Association said.

Pepper output for this year was estimated at around 100,000 tonnes, already 82,000 tonnes exported, 10 percent lower than last year, the association said.

Ngo So Minh, director of southern Binh Duong province-based pepper exporter Ngo Gia Co Ltd, said the average export price for Vietnam this year has been $5,114 for a tonne of black pepper and $7,442 for white pepper.

In the first half of July it neared $5,950  while the spot price at the New Delhi exchange last weekend was $6,500, he said.

In the domestic market, pepper cost around VND111,000 per kilogramme last weekend, and VND115,000 in southern Dong Nai province, he said.

"The upcountry stockpile is very low these days, at less than 20,000 tonnes. So exporters have to compete with each other to get pepper at an extremely high price," he said.

Le Duc Huy, manager of a pepper exporter based in the Central Highland province of Dak Lak , said due to the high prices in the local market, exporters need more funds.

"High interest rates on bank loans and tightened credit have hindered our pepper business," he said.

"No one would like to buy large volumes of pepper and sit on it. It is very risky."

Huy said another 20,000 tonnes would to be harvested this year.

"The pepper market will face a tough time once Vietnam stops selling at the end of the season," he warned.

ADB forecasts further inflows of foreign capital into Vietnam

Newly-emerging economies in Asia will continue to attract foreign investment after the crisis in the securities market thanks to high economic growth.

This was affirmed by Iwan Azis, head of the Asian Development Bank’s Office of Regional Economic Integration in a report “Asia Capital Markets Monitor”.

If anything distinguishes the region from the rest of the world it is its strong macro-fundamentals, said Azis.

The economist said the current crisis in the global financial market will not stop the flow of investments in the medium term to the 11 emerging Asian economies including China, Hong Kong, India, Indonesia, Malaysia, the Philippines, Singapore, South Korea, Taiwan, Thailand and Vietnam.

According to the ADB’s report, along with the strict control of the financial market and foreign exchange reserves, the Asian region now has had surplus reserves and liquidity after the Asian financial crisis in 1997. Therefore, there will be many financial tools to attract investors.

The ADB report also showed that the region’s economies grew a composite 9.2 percent in 2010, and were forecast to grow 7.7 percent in 2011 and 7.6 percent in 2012.

With its tightened controls on its financial markets and boosted national foreign exchange reserves since the Asian financial crisis of 1997, the region now enjoys excess savings and liquidity, said the ADB report.

However, ADB forecast that the region’s exports to traditional markets such as the US and Europe will decrease and said policy makers in emerging Asia needed to develop their tools to deal with volatile capital flows which can lead to "boom and bust cycles."

To cope with instability in the US and euro zone, ADB also emphasized the need to take drastic measures to win investor trust and reduce strong fluctuations.

Phu Yen to host Central and Central Highland trade fair

Industrial stimulation and promotion centres and domestic and foreign professional associations have registered for 400 stalls at the 2011 Central and Central Highland Trade Fair, which will open in Phu Yen province on September 1.

The information was released by Le Van Truc, Vice Chairman of the Phu Yen provincial People’s Committee, at a meeting on August 9.

In addition, six businesses have completed their negotiations and registered to sign their contracts at the event.

During the nine-day trade fair, there will be a host of activities such as a seminar on processing and exporting seafood and one on protecting consumer rights.

This year’s event, part of the National Tourism Year in South Central Coastal region – Phu Yen 2011, is expected to open up opportunities for local businesses to cooperate with domestic and foreign partners.

Ministry approves saltwater fish breeding plan

The Ministry of Agriculture and Rural Development has approved the master plan to develop saltwater fish breeding in the 2015-2020 period.

Accordingly, the ministry set a target of producing 61,000 tonnes of brackish and salt water fish in 2015, which will increase to 98,000 tonnes in 2020.

The output of caged fish is expected to reach 44,000 tonnes in 2015 and 51,000 tonnes in 2020 and that of industrially-reared fish to hit 55,000 tonnes and 111,000 tonnes, respectively.

Under the plan, the total output of saltwater fish in 2015 will be 160,000 tonnes, valued US$1.04 billion in 2015, it will reach 200,000-260,000 tonnes, worth US$1.8 billion in 2020.

Tra fish exports to US earn US$135 million

So far, Vietnam has exported nearly 39,000 tonnes of tra fish to the US, earning US$135 million, up 85.5 percent in volume and 105.5 percent in value against the previous year.
 
According to the Vietnam Association of Seafood Exporters and Producers (VASEP), the US continues to top the list of Vietnam’s tra fish importers, making up 16 percent of Vietnam’s tra fish export turnover.  

The export price of tra fish dropped to US$3.19 per kilogram in March but rose to US$3.79 per kilogram in May.

In the first half of this year, the average export price of tra fish rose by 12 percent to US$3.51 per kilogram compared to the same period last year.   

BIDV Insurance to list in HCM bourse

The BIDV Insurance Corporation will list 66 million of its shares, valued at VND660 billion (US$32 million), on the HCM Stock Exchange on September 6 under the code BIC.

The reference price will be VND11,500 ($0.56) per share.

BIC is the insurance arm of the Bank for Investment and Development of Vietnam (BIDV), which holds a 82.3 percent stake in the company.

It posted a before-tax profit of over VND45.5 billion ($2.2 million) in the first half of this year, a year-on-year increase of 25 per cent and equivalent to 45.5 percent of its annual profit target.

Currently, there are five insurance companies listing on the HCM City bourse, including Bao Viet Holdings (BVH), PVI Holdings (PVI), the Post and Telecommunication Insurance Corp (PTI), the Vietnam National Reinsurance Corp (VNR) and the Petrolimex Insurance Co (PGI).

Chinese traders reap big from Vietnamese litchis

Chinese traders who buy Vietnamese litchis at dirt cheap prices are selling them for 20 times as much in China.

Two reporters from Sai Gon Tiep Thi Newspaper visited two Chinese shops in Guangxi City in China last month and surprisingly found Vietnamese litchis were being sold there for CNY96 (VND305,760 or US$15) per kg.

Sai Gon Tiep Thi said this is exorbitant compared to the VND13,000 to VND16,000 per kg that many Chinese traders have paid to buy fresh litchis of the best qualities from Vietnamese farmers in Luc Ngan District in the northern province of Bac Giang which is famous for its litchis.

For its part, state-owned Vegetable & Fruit Processing Company under the Ministry of Agriculture and Rural Development has suggested purchasing Luc Ngan litchis at only VND8,000 per kg for exporting.

According to Hoang Minh Phuong, the deputy head in charge of economic affairs in Luc Ngan District, farmers in the area have enjoyed a good harvest of 90,000 tons of litchis this year, which is 1.5 higher than the same period last year and 60 % of this amount has been purchased by Chinese traders.

Vietnam attracts US$23.2 bln from Singaporean investors

The flow of Singaporean investment in Vietnam had reached US$23.2 billion by July 2011, making it the third largest foreign investor in the country.

The figure was released at ceremony, which was co-hosted by the Ho Chi Minh City chapters of the Vietnam Union of Friendship Organisations and the Vietnam-Singapore Friendship Association on August 6 to celebrate Singapore’s 46th National Day (August 9).

Singaporean Consul General in HCM City, Pong Kok Tian, said bilateral relations, which were officially established 38 years ago, have been strengthened and expanded in many fields, from politics to economics, trade, investment, finance-banking and people-to-people cooperation.

Singapore has become a favourite destination of tourists, welcoming 323,000 Vietnamese holidaymakers in 2010 and 119,000 visitors in the first five months of this year.

Vietnamese timber seeks outlets in EU

Vietnam’s timber products will find it easier to penetrate the EU market if the country becomes involved in the FLEGT-VPA. So, what is the FLEGT – VPA and how will it benefit businesses?

FLEGT-VPA is the Forest Law Enforcement, Governance and Trade - Voluntary Partnership Agreement, a legally binding bilateral trade agreement between the EU and a timber exporting country (the FLEGT partner country), under which the partner country agrees that its wood and timber products will only be exported to the EU after the legality of the products has been established.

It is expected that the EU will require an FLEGT license for timber products imported from Vietnam by March 2013.

According to the national forestry strategy for the 2006-2020 period, Vietnam aims to plant 4 million of hectares of natural forest to provide 45 million cubic metres of timber each year.

Under this strategy, Vietnam will strive to increase forest coverage to 42-43 percent by 2015 and ensure stable development by 2020, aiming for a production value of 3.5 to 4 percent per year. This will contribute 2-3 percent of the GDP and an export turnover of US$7.8 billion by 2020.

According to the Vietnam Wood Association, Vietnam must continue to import raw timber in the near future as the country has not yet set up zones for producing its own raw wood materials.

Vietnam’s wood processing industry currently imports timber from many nations so it is difficult to control the legality of these products. This makes Vietnam an exporter that is likely to be at risk amid fluctuations in the world market. Vietnamese wood products will face many challenges if drastic measures are not taken to adapt to these changes.

Ms Suzanne Morgan, a representative for European buyers, said that in the future, Europeans will seek environmentally friendly products from clear, sustainable sources. Therefore, Vietnamese businesses should ensure the proper invoices and documents stating the origin of the product to avoid risks when importing timber.

According to experts, timber export businesses should obey the regulations set by the FLEGT and the US Lacey Act to curb illegal timber imports. Exports should have correct documentation of their origin and timber products should be legally produced under the laws of Vietnam or have a certificate of forest management from a third party country.

Vietnam now has more than 3,400 timber businesses and 600 wood export workshops that recruit over 300,000 labourers.

The country's five biggest wood processing centres are in Ho Chi Minh City, Binh Duong, Dong Nai, Binh Dinh, and Quang Nam-Da Nang. These centres include a large number of private enterprises (81 percent) while 5 percent of their businesses are State-owned. Foreign-invested businesses, mostly on a medium and large scale, make up 14 percent and contribute 40 percent to the country’s total wood export turnover.

Experts say Vietnam should negotiate a FLEGT/VPA with the EU to maintain and expand its markets in the EU, US, and Japan, and to avoid a recession in this sector with more than 300,000 workers in over 3,000 businesses. The country should improve its image and build reliable trademarks for its wood processing industry and upgrade its institutions in the forestry sector. It should also focus on enforcing the laws, ensuring sustainable management, and implementing international initiatives on climate change and CO2 emissions.

Giuliana Torta, an EU expert in Belgium, said that it is voluntary for countries to commit to the FLEGT license. However, if Vietnam negotiates a FLEGT with the EU, EU-member countries must go along with the commitment. Once a country receives the license, its timber products are recognized as legal and sustainable by all 27 EU-member countries.

Vietnamese businesses can decide for themselves whether to obtain the FLEGT license or not. Those enterprises that do not have the license may face risks such as technical barriers and sanctions if they violate the rules, she added.

Dr. Ha Cong Huan, Deputy Director General of the Directorate of Forestry under the Ministry of Agriculture and Rural Development, said that Vietnam will negotiate with the EU on issues related to forest and timber products. The country is aiming to grant FLEGT licenses free of charge to local businesses by 2012. Vietnamese experts are trying to adapt quickly to demanding international markets, including the US and Japan.

Vietnam aims to develop a legal forest product assurance system in line with international regulations and conventions in order to respond to unexpected changes in the market, adapt to climate change, and promote sustainable forest management by following the EU’s FLEGT/VAP initiative, he said.

Forex risk mounts as credit grows

July’s credit growth of 7.57 percent compared to late last year is fueling concerns about the volatility of the exchange rate towards the year’s end.

The State Bank of Vietnam said outstanding deposits by July 20 had dropped 0.25 percent from June and 3.96 percent from last year and Vietnam dong deposits rose by a mere 0.5 percent while those in foreign currencies declined 3.20 percent.

The July credit growth was 0.19 percent lower than last month. Dong credit dipped 0.88 percent but foreign currency credit rose by 1.96 percent, the central bank said.

More enterprises tended to borrow the greenback despite the central bank’s stance on credit tightening because the interest rate for dollars was 7-8 percent, much lower than that for dong, which is above 20 percent.

Enterprises could have made some profit from the difference between these rates by selling the greenback that they had borrowed and depositing the dong to enjoy the high dong rate.

Many experts said there were few signs of dong being devalued after the big devaluation last February, which has made the exchange rate stable ever since, so enterprises would continue to borrow dollars.

Dollar deposits fell as the interest rate in July was only 2 percent while the interest rate for dong was 14 percent or higher. According to the central bank, dollar deposits last month went down 3.29 percent but those in dong were up by 0.51 percent.

Experts said they were concerned that when dollar loans were due, the demand for dollars to repay the loans would increase and thus affect the exchange rate.

Banks are in short of dollar funds as outstanding dollar loans far outweighed mobilization, said Ho Chi Minh City Securities Company.

It said this may drive up the dollar deposit rate above the cap set by the central bank, as shown by an increase to about 2.35 percent of the interbank dollar interest rate for one-week tenor.

The difference between the interest rates for dollar and dong funds is narrowing down as the rate for dong is declining.

The shift from dollar to dong deposits has become popular recently. However, the opposite could happen in the near future.

The foreign exchange market has remained stable, and the interbank exchange rate as well as the exchange rate on the free market, have risen by only VND40-50.

If interest rates are down too fast, the exchange rate will rise again.

High gold prices in the domestic market might lead to gold trafficking, which could affect the exchange rate as dollars would be bought to smuggle in gold and thereby drive up demand for dollars.

The selling price of the dollar at banks rose last week, particularly at Eximbank that quoted the greenback at VND20,650, up by VND25.

Le Xuan Nghia, Vice Chairman of the National Financial Supervisory Commission, said the country’s foreign reserves had soared to $4 billion in recent months and that the central bank could interfere if the foreign exchange market went wild.

However, the foreign exchange risk is one of the major risks Vietnam will have to face by the year’s end, Nghia said.

Rice exporters hard hit by rising prices

Expectations buoyed by the Pheu Thai party’s pledges to buy rice from Thai farmers at much higher prices and a record rise in Vietnam’s rice export contracts in July have led rice prices here to soar, delivering a surprise blow to exporters.

Ba Anh, a Tien Giang Province-based supplier of high-grade rice for the Ho Chi Minh City market, said the buying price of ordinary and Jasmine rice had risen steadily over the past two weeks, by VND500 to VND1,000 per kg.

“The higher prices have impeded my trading as my retailers have held off on new orders to see what will happen next,” Ba Anh said. “Some retailers have actually rushed to buy but their sales have been slow.”

However, the purchasing power of lower-grade rice for export is extremely strong, she said, adding the type for export was normally snapped up the moment it was transported from the field to the market.

A business that has a milling facility in Long An Province has bought the dried, long-grain paddy, unhusked rice, at VND6,900 per kg from traders, a price which has been unseen for years.

Rice prices have been on the rise since early July, with the price of 5% broken rice for export surging to VND8,650 per kg from the VND7,700 recorded early last month.

The FOB export price of 5 percent broken rice has climbed to VND10,500 per kg, higher than the high seen during the rice crisis in 2008, according to this business.

This situation has mainly resulted from high expectations in Thailand, the world’s biggest rice exporter with an average of nine million tons exported a year.

During the election campaign, Yingluck Shinawatra’s Pheu Thai party promised to buy the food staple directly from farmers at 15,000 baht (US$500) per ton, far higher than the price offered to farmers by exporters. If the promises come true, Thai rice for export will rocket to US$800 a ton.

News that Vietnamese rice exporters have won big contracts from customers in the Philippines, Africa and China and that Southern Food Corporation (Vinafood 2) has secured a contract to sell 500,000 tons to Indonesia in July has also pushed up domestic prices.

These factors have caused rice prices for domestic and foreign markets to leap, from below US$500 a ton to US$510 in early July and then to US$530-540 in early August, causing hefty losses for exporters who already signed export contracts at lower prices.

The business that has the milling factory in Long An Province said it lost US$35 last month for each ton shipped under a deal clinched in early June to sell 500 tons at $480 a ton.

“We have to make delivery as promised or we will lose our customer and especially our reputation in a highly competitive market,” said the business.

Speaking at a meeting of the Vietnam Food Association (VFA) in HCMC last Friday, many exporters said they had not made a move this time around though export prices were ranging from US$530 and US$540 a ton, fearing market volatility would continue.

VFA’s Chairman Truong Thanh Phong warned exporters without available rice stock against signing new contracts since a significant number of big contracts might move from Thailand to Vietnam.

Recently, some foreign traders, including Thai ones, have come to collaborate with domestic suppliers to purchase rice for export.

Handicrafts exporters hit by rising costs

With costs soaring, many handicraft export firms and cooperatives based in Ho Chi Minh City have been forced to reject new orders to avoid losses.

Many are barely remaining open and have cut down on payrolls.

Dang Quoc Hung, deputy chairman of the Handicraft and Wood Industry Association of HCMC, said costs have risen by 20 to 30 percent but customers only agree to increase prices by 5-10 percent.

“So just a few of the large number of orders received … are accepted,” he said.

Exporters said they only accept small, short-term orders but even these cause losses.

Nguyen Van Nguyen, head of the Binh Minh bamboo curtain cooperative based in Phu Nhuan District, said he rejected many orders from Australia, the US, and the EU since costs changed on a daily basis.

“We accept small contracts and only manage to break even.”

The troubled industry has been reducing its workforce and cutting back on wages.

The Binh Duong-based wooden clog exporter Hung Thai Company, for instance, said it sacked 75 percent of its workers last year.

Nguyen said members of his cooperative now earned only VND2.5 million a month, a 37 percent decrease since earlier this year.

“We only manage to export one container a month, while earlier this year it was three to four,” he added.

PV