Effective measures needed to rescue businesses

The Government’s approval of a VND29 trillion bailout package will not pay off as expected if there are not effective measures to address economic weaknesses in the long run.     
    
VND29 trillion is not a big sum to compare with the State budget spending and 2009’s VND150 trillion stimulus package. In order to avoid the mistakes made during the implementation of the 2009 stimulus package, policy makers have more than once affirmed that it is a “bailout”, not a “stimulus” package.

The stimulus package offered three years ago has failed to provide an interest rate subsidy of 4 percent to the needy businesses, as the reduction and deferment of taxes simply “leveled the playing field” for all of them.

In addition, there is no detailed report on the implementation of the package made public so far.

Regarding this year’s bailout package, economist Bui Kien Thanh says the deferment of value added tax (VAT) is not very significant because it can only help businesses use the money as circulating capital, but does not reduce product prices.

The 30-percent reduction in corporate income tax can only help profit-making businesses, which are not in dire need of assistance.

Economist Pham Chi Lan proposes cutting corporate income taxes because the current tax rate of 25 percent is much higher than the average level in Southeast Asia and may affect businesses’ competitive edge.

Meanwhile, Thanh proposes an exemption of VAT, which he thinks can help enterprises reduce their product prices by 10 percent.

It is also necessary to create favourable policies to let businesses use their in-stock products as mortgage.

Lan says the bailout package is crucial for not only stabilizing the macroeconomy but also rescuing businesses.

Macroeconomic stability is aimed at reducing inflation, she says, but with thousands of businesses hitting the wall it is not sustainable enough.

Ha Huy Tuan, Vice Chairman of the National Financial Supervisory Commission, says there remain serious problems to be addressed in the national economy.

He cites what happened in 2008-2009 as a case in point that showed implementation of the stimulus package and policies to restructure businesses was not as effective as expected.

Tuan recommends there would be long- and medium-term policies instead of band-aid measures.

Declining demand slows down economic growth

Tightening monetary policies have helped contain demand for credit and inflation, but limited credit is likely to slow down economic growth in 2012.

According to HSBC experts, Vietnam has been successful in reducing demand to control inflation, but this has also decreased economic growth more than expected.

In the first quarter of this year, economic growth declined to only 4.1 percent against the same period last year, marking the lowest rise since March, 2009. The service sector experienced the sharpest decrease.

The slow growth of the economy reflects the tight credit supply. Businesses are facing various challenges and this was shown in the declining outstanding loan balance in 2011 and 2012. Difficult access to capital resources has forced thousands of businesses to dissolve or halt their operations, especially real estate and construction companies.

The growing gap between exports and imports is another sign of the decrease of domestic demand. Exports have been up 22.1 percent since the beginning of the year, while imports have risen only 4.4 percent.

As most of Vietnam’s imports are materials for production, the gap shows businesses’ careful consideration. In fact, imports of fertilizer, cotton, fiber, footwear material, steel, automobiles, petrol and gas have seen sharp declines compared to the same period last year.

With economic growth slowing down more than expected and inflation following a downward trend for months, HSBC predicts that the State Bank of Vietnam (SBV) is likely to loosen monetary policies in the third quarter of this year.

The Government will also facilitate the economy’s credit growth through administrative tools and the implementation of preferential credit policies for the economy’s key sectors.

However, HSBC forecast that Vietnam’s economic growth in 2012 will reach only 5.1 percent, much lower than the 5.9 percent of 2011, despite loose monetary policy and faster growth in the remaining months of 2012.

Although there have been more positive signs for the stabilisation of the Vietnam dong, such as the decreasing trade deficit and the surging FDI inflow in the past six months, HSBC experts maintain their cautious view on the stabilization the currency, as they are concerned that the monetary policy may become too loose if inflation bounced back at the end of 2012.

If inflation keeps decreasing, the Vietnam dong will be stable, they predict.

They also said the SBV’s decision to cut deposit interest rates in March and April and the downward trend of inflation are positive signs for the currency, which has long been in a vicious circle of devaluation and inflation.

Although Vietnam managed to curb inflation, experts warned of the price pressure which is likely to return to Asian countries in the second half of the year.

If the SBV’s monetary policies fail to keep pace with the market, there will be a negative impact on the Vietnam dong by the end of 2012, they said.

Restructuring project to benefit private businesses

Although the project to restructure State-Owned enterprises has not come to an end, it is said to significantly affect non-State ones, which are expected to have easier access to business resources.   

The project, proposed by the Ministry of Planning and Investment (MPI), is aimed at making better use of resources in SOEs, thus contributing to restructuring the economy and renovating the growth model.

Accordingly, changes should be made in the business environment, the management system, and the organization of SOEs to raise the effectiveness of resource use and operational efficiency.

However, SOEs’ leading roles should be built in an equal business environment rather than based on special preferences. Therefore, the project has made SOEs operate in accordance to the market-based mechanism, like non-State businesses.

Pham Thi Thu Hang, Secretary General of the Vietnam Chamber of Commerce and Industry, says the restructuring of SOEs offers opportunities for non-State enterprises to gain equal access to business resources including capital, technologies, and land, which used to be a barrier to their operation.

However, in the current difficult economic context, they have been confronted with various challenges. This was reflected in the increasing number of businesses being dissolved or halting operations, and difficult access to resources is said to be among the reasons behind the problem.

In addition, poor management capacity of non-State enterprises and depreciable assets are also factors limiting their access to such resources, she says.

Hang proposes helping these businesses sharpen their capacity to take advantage of expanding access to business resources.

In other words, she says, non-State businesses should “restructure themselves”.

According to a recent VCCI survey, the private sector outnumbers in categories of small businesses with 50-200 employees. This means that most non-State businesses are small-sized ones.

Despite the fact that their assets are much smaller than those of the State sector, the number of people working for the private sector has seen a sharp increase over the past five years (from 51.7 percent to 62.3 percent of the workforce).

It’s no easy task for private businesses to restructure, due to their limited assets and poor management capacity.

MPI Deputy Minister Dang Huy Dong says, in addition to encouraging non-State businesses to invest in fields with high productivity, it is necessary to help them improve their capacity.

Dong says there are two main reasons leading to private enterprises’ difficulty in accessing capital.

Due to businesses’ poor management capacity, many of their projects are not accepted by banks even though they are feasible, he says, adding that bank mortgage requirements are another hurdle for non-State businesses.  

The Deputy Minister says the MPI is considering setting up an assisting agency to help the private sector access capital and improve their competitive edge.

This agency will help businesses draw up feasibility plans by coordinating with independent consultancy units of central ministries and agencies, he says.

Binh Duong takes lead in attracting FDI

Southern Binh Duong province takes the lead in attracting foreign direct investment (FDI) with US$1.6 billion, or 37.2 percent of the country’s total FDI, over the past four months.   

In spite of the difficult economic times, Binh Duong has attracted a number of important projects recently, especially from Japanese investors.

The Binh Duong Tokyu Urban Residential Area project is most notable, worth US$1.2 billion.

The Provincial People’s Committee on May 11 granted an investment license to the Japanese Dai Nippon Printing – DNP group which specializes in producing and trading printing and packaging machinery and equipment.

The group will build a factory at My Phuoc 3 Industrial Zone to produce film templates for the packaging industry, with total investment capitalization of US$35 million in the first phase.

The important project will provide high quality materials for the packaging and printing industry to meet the rapid development of the province’s industry and service sectors.

Japan has so far invested in 176 projects, ranking first among 35 foreign investors in Binh Duong province.

Indian businesses keen on Vietnam’s investment environment

A seminar on Vietnam-India bilateral trade and investment opportunities in the post FTA period was held in Kerala, India, on May 10 by the Vietnamese Trade Office in India and the Cochin Chamber of Commerce and Industry (CCCI).     

Trade counsellor to India Nguyen Son Ha briefed participants on trade and investment activities between Vietnam and India in recent years and introduced the ASEAN– India Free Trade Agreement (FTA), which came into effect from June 1, 2010, and a tax cut roadmap to help Indian businesses seek opportunities in Vietnam.

Many Indian businesses at the seminar showed keen interest in information about Vietnam’s investment environment, including procedures to set up business, preferential policies, labour recruitment, wage mechanism, and import-export management, as well as exhibitions and fairs in the country.

Ha provided the latest information about Vietnam’s external economic policies and useful addresses to get contact. He encouraged Indian businesses to take part in exhibitions and fairs in Vietnam to introduce their products to local consumers.

After the trade promotion seminar, the Vietnamese Trade Office worked with some Indian agencies in Kerala, such as the Rubber Board, the Spices Board, the Marine Product Exports Development Authority (MPEDA) and the Coir Board.

The office hoped that Indian agencies will facilitate cooperation between businesses from both countries to fulfil the target of raising their two-way trade turnover to US$7 billion by 2015.

Promoting Vietnam’s image in Argentina

Vietnamese Ambassador to Argentina, Nguyen Van Dao, has visited Rio Cuarto City to seek opportunities to boost bilateral cooperation.

Receiving the ambassador, a Rio Cuarto senior official introduced the city's potential, strength and development demands and expressed his hope that Dao’s visit will help boost multifaceted cooperation with Vietnam, especially in economics, culture and education.

At a meeting with local businesses, Dao briefed the hosts on Vietnam’s socio-economic achievements in recent years, and foreign investment attraction and protection policies.

The diplomat invited businesses to attend the Vietnam-Latin America investment and trade forum to be held in Hanoi in July to seek cooperative opportunities in Vietnam.

While attending a seminar to promote Vietnam’s land and people, ambassador Dao emphasized on fine relations between the two countries, with many signed framework agreements creating the foundation for implementing cooperative projects.

April-Disappointing month for local auto sales

Total auto sales in April decreased by 20 percent from March and 37 percent from the same period last year, says the latest report by the Vietnam Automobile Manufacturer’s Association (VAMA).     

Accordingly, 18 VAMA members sold 6,004 vehicles this month, 1,541 units less than the previous month and 3,554 units less than a year earlier.

Sales of Complete Knock Down (CKD) vehicles saw a sharp decline of 24 percent against March, with 5,504 CKD units, while those of Completely Built Unit vehicles was down 23 percent to 1,478 units.

In January, VAMA set a record low of selling only 4,274 vehicles, the lowest level over the past three years. It then rose gradually to 6,116 units in the following month.

VAMA’s four-month sales reached 24,102 vehicles, tumbling 36 percent from the same period last year with sales in the personal car (PC) segment down 41.7 percent, Multi-purpose Vehicle (MPV), Sport Utility Vehicle (SUV) and cross-overs were down 48 percent, and truck, pick-up and van down 29 percent.

Tuna exports to Japan soar to US$26.4 mln

Tuna export value to Japan in the first quarter of 2012 saw a sharp year-on-year increase of 99.5 percent to US$26.4 million, said the Vietnam Association of Seafood Exporters and Producers (VASEP).

The association attributed the increase to Japan's increasing demand for tuna and its reducing tuna output.

Tuna exports to Japan are expected to increase further by the end of this year, VASEP said, so processors should improve the quality of products and the state should have favourable policies to encourage farmers to rear tuna.

Last year, Japan imported 12,000 tonnes of tuna for domestic consumption.

iPad 2012 on sales in Vietnam

Three chosen Vietnamese distributors, so-called Apple Premium Resellers, have started to sell the Ipad 2012 tablet in the local market.

Nearly two months after the official launch in the world markets, the 3rd generation of the Apple Inc’s tablet is now available at stores of FPT, Future World and iCenter (Jel), according to Apple’s official website.

But the prices of the latest version of the tablet, also running the newest iOS, are different, said newswire Vnexpress.

The prices at the iStore Premium system under FPT are VND11.9 million, VND14.19 million and VND14.49 million for the versions with Wifi connection and 16GB, 32GB, and 64GB internal memory respectively. For the version with 4G connectivity, the respective prices are VND15.59 million, VND17.69 and VND20.19 million.

Meanwhile, the respective prices offered by Future for the versions with Wifi connection are VND11.69 million, VND13.78 and VND16.15 million. The prices for the versions with 4G connectivity are VND15.24 million, VND17.33 million and VND19.75 million.

The prices at iCenter (Jel) are equivalent to the Future World.

All the aforementioned prices are inclusive of value added tax. Genuine products will get full warranty in accordance with Apple's standard worldwide.

Local technological newswire Tinhte.vn, however, said the price tags at the three places are the same for all the versions.

The prices of the genuine products are a little higher today compared to the rumor a few days ago and also higher than those sold unofficially as they can evade tax imposition.

The unofficial prices of the new iPad have narrowed down to the floor price with VND11.5 million for the cheapest Wi-Fi version. The respective prices for the 4G connection versions are VND13.9-14.2 million, VND15.9 million and VND18.2 million.

A representative of FPT told Vnexpress that the first batch of about 500 tablets had been shipped to Vietnam, half of which had already been booked through online and telephone channels.

The representatives of the distributors said the disadvantage in price will be offset by the post-sales policy, warranty, and customer care services.

Apple recently said that sales in China are booming, and Apple is making inroads into the Asian country more quickly, according to a report from Beijing Business Today newspaper.

According to the report, Apple's Q2/2012 sales have tripled from the same quarter last year, and China now accounts for 20 percent of Apple's global revenue, up from 2 percent in 2009.

Thus far in fiscal year 2012, Apple's China sales reached $12.4 billion, a figure that almost matches the $13 billion in China sales the company reported for all of 2011.

It's not only the iPhone and iPad that's doing well; MacBook sales have also jumped 60 percent since the device first made its Chinese debut.

Vietnam dong appreciating: academics

The Vietnamese currency, the Vietnam dong, is increasing in value, said a research team of the Institute for Financial Strategies and Policies under the Ministry of Finance at a recent conference.

By the end of 2011, the dong appreciated 23.8 percent and 5.7 percent against the US dollar and a "basket" of foreign currencies of other trading partners, said the team at "Coordination of fiscal and monetary policies in macroeconomic regulation” conference held by the ministry in Hanoi.

On the foreign exchange market, the exchange rate has relatively been stable since early this year.

Local exporters are still actively selling foreign currencies to credit institutions, leading to negligible differences in the forex rate between the dong and the greenback.

The prices of the greenback at commercial banks have even lower than the benchmark rate set by the State Bank of Vietnam (SBV).

The depreciation of the greenback against other currencies in recent years is the main cause for the appreciation of the dong, said the team.

However, the research team said, a stable exchange rate still remains a challenge for local policymakers.

Accordingly, as inflation will be on a downward trend until the year-end due to the effects of tightening monetary and fiscal policies, SBV should consider minor adjustments to encourage exports, reduce trade deficit, and improve balance of payments and the national forex reserves.

According to SBV, the average interbank forex rate last week remained unchanged at VND20,828 a dollar.

The rate has been stabilized for the 19th consecutive week, the longest chain since the beginning of 2011.

Earlier last week, many banks raised the ask price for the greenback by VND20-30 a dollar over the previous to VND20,900 a dollar. However, from mid-week, the rate started to fall.

Last week, the bid and ask prices at Vietcombank were at VND20,820 a dollar and VND20,870 dong a dollar, unchanged from the previous week.

The SBV Governor Nguyen Van Binh early this year said that the forex rate between the greenback and the Vietnam dong would be adjusted within 2-3 percent in 2012, showing his confidence on the stability of the forex rate.

Such a confident statement is needed for market then since it will be firm foundation for investors and the business community to rely on.

But, about that same time, newswire Vneconomy found the concerns behind the stability of the forex rate raised by two professional bodies, the Economic Committee of the National Assembly (ECNA) and the National Financial Supervisory Commission (NFSC).

The ECNA said the exchange rate should be operating flexibility and should not be anchored to such a narrow range of 2-3 percent.

It will narrow maneuverability of the monetary policy, affecting exports and can trigger hot money inflows into Vietnam to take advantage of the difference in interest rates.

Such concise recommendation has several implications.

The commitment from SBV will make the urgent need in cutting the dong interest rate faced more hurdles as it create adverse impact on the exchange rate.

Secondly, ECNA said the current environment is stimulating the hot inflow, but if there are signs of unfavorable forex adjustment leading to a reversal, it will cause more pressure on the forex rates.

At this point, the ECNA has a rendezvous" with the NFSC, as the latter said the difference in the dong and the US dollar interest rates will create a cross-border arbitrage inflow into Vietnam in two forms of indirect investment and overseas short-term lending.

"This will help increase the supply of foreign currency to facilitate exchange rate stability, increase the national reserve.”

“But this short-term inflow will quickly move out of Vietnam if the forex rate is adjusted too fast with a wider range than committed.”

“This is in the medium-term risk if the value of the outflow is larger than the national reserve,” said NFSC.

The differences in inflation this year between Vietnam and other major trading partners will be in about 5 - 7 percent, NFSC mentioned another aspect hidden behind the stability of exchange rates.

According to the NFSC's calculations, by the end of 2011, real multilateral exchange rate (REER), which is compared with a basket of 19 currencies of major trading partners with reference to the base year 2000, at around 94.56, meaning the dong is still some 5.46 percent higher than its real value.

So, if a fixed exchange rate is kept, the dong will be valued higher than other currencies, thus affecting the competitiveness of exporting activities of Vietnam in the future.

With the analysis, NFSC said that the ability to maintain a stable exchange rate in 2012 can still be realized, but SBV need flexibility in adjusting the exchange rate by selecting the appropriate framework for harmony between many economic targets.

Sanofi Group to build third factory in Vietnam

Sanofi Group, a global pharmaceutical company, plans to build its third factory in Vietnam which is one of seven emerging markets in the region.

This was announced by Hanspeter Spek, CEO of Sanofi Group, during his working visit to Vietnam.

Currently, Sanofi Group has two pharmaceutical factories in Ho Chi Minh City with 80 percent of total production output consumed in Vietnam and 20 percent exported to Asian countries.

Sanofi-Synthelabo Viet Nam Pharmaceutical Venture Company’s turnover in 2011 increased by 24 percent over 2010, and its exports reached US$6 million.

In the first quarter of 2012, Sanofi Vietnam achieved a growth rate of 22 percent, ranking the second among multi-national companies operating in Vietnam.

The global group, which gained a turnover of EUR34 billion last year, also plans to expand operations in Laos and Cambodia.    

Vietnamese brands have little presence in China

There are still not many Vietnamese products on shelves at supermarkets and trade centers in China, remarked a business delegation of the Vietnam High Quality Goods Association after their trip to Guangzhou -- China's largest commercial city.

At the food commodity section inside the international exporting fair being held in Guangzhou, there are less than five Vietnamese manufacturers participating.

They include a cashew processor and a seed seller, and the Vinamit Co, which sells dried fruit and coffee powder.

It is even more difficult to find Vietnamese-made goods in China’s supermarkets, even in the Lotus chain, which is one of the five largest supermarket systems of the country.

“This is because Vietnamese manufacturers have yet to make good use of the chance to penetrate the Chinese market,” To Quoc Tuan, Consulate General of Vietnam in Guangzhou, told the business delegation upon receiving them from Ho Chi Minh City.

“The crucial factor in boosting official trade between Vietnam and China is to destroy the mindset barrier.

“Many Vietnamese companies said they are hesitant in doing business with Chinese partners since it’s easy to get into trouble, to have their brands faked, or to be swindled in China,” explains Tuan.

Some said it is impossible for them to sell goods to China, where every kind of product, from bogus to deluxe, are produced en masse, continues Tuan.

Meanwhile, he adds, instead of conducting official trading, many local manufacturers choose to export goods in small volumes across the border, which is much simpler than official exports.

“Vietnamese companies lack information about the Chinese market, while they do not study the market through their own initiatives, and thus fall into a passive state,” concludes Tuan.

Many local manufacturers who choose to trade with China via the small-volume border export say their Chinese partners, who are their exclusive distributors in China, threaten that they will disrupt trading if the Vietnamese companies switch to official trading.

“Such a restriction is a pity, as there is huge room for Vietnamese traders to develop in China,” comments Tuan.

“There is a market of 500 million people in the southwestern region of China, while the country is implementing the ASEAN-China Free Trade Agreement (ACFTA), and its consumers favor Vietnamese products,” he elaborated, adding that all of these are chances for Vietnamese firms to grab.

Some local businesses that have penetrated the Chinese market have not shared their information or experience in doing so in order to protect their market shares.

“But now that products of other ASEAN countries have found a larger place on Chinese shelves, Vietnamese manufacturers have realized that it’s time they stand together.

“Joining hands with each other will help Vietnamese businesses make better use of the opportunities, reduce risks, share information, and protect each other,” the consulate general states.

Crewmen suffer hard lives on Vinalines’ ships

Living on the ill-fated vessels held by Vinalines are the crewmen who lead tough lives since their wages are not enough for them to make ends meet.

The US$19.2-million Song Gianh vessel that has been docked in the MAR2 area on the Saigon River for four years has become known by locals and crew members as “Song Gianh pagoda,” as there is a Vietnamese proverb that goes “as desolated as Ba Danh pagoda.”

All of the crew members say they are totally fed up with the boring life on the almost-dead ship, which is always full of mosquitoes even during the day.

Crewmen have taken turns living on and taking care of the ship for a few years, they said.

There are currently five men on the vessel, including a captain, a vice-captain, and three crewmen.

“Our job is to protect the ship from robbers and harsh weather, and take care of the anchor,” said captain Doan Ngoc Bach, who has been taking the helm of many huge vessels since 1976.

Despite his experience, Bach still had no choice but to accept to stand still on Song Gianh ship, he said.

“I’ve spent time doing nothing on the Hoa Sen when it was docked dormant in a Chinese port, and was sent to look after the Song Gianh earlier this year.

“While it’s OK for a seasoned captain like me to stay on the ship, it’s a great pity for the young crew members as no one knows when they will really be able to sail on the ocean.

“While staying here, they not only learn no professional knowledge, but they also receive modest wages,” shared Bach.

All three crewmen on the ship are fresh maritime graduates who have yet to sail on any journeys.

“It’s also hard to give up on the career given the great effort we put forth at school,” said Hoang Dinh Long, one of the three.

Similarly, at the No83M floating dock, which was intended to handle the repairs for Vinalines’ shipping fleet but has itself been under constant maintenance over the last four years, crew members are now taking the job of security guard.

“I’m bored to death by the dark future of sticking to this useless equipment,” said D., a mechanic who has been living on the floating dock for three years.

“I have to make use of the time when I am allowed to go ashore to work part-time for mechanical facilities to earn a livelihood,” shared D.

“You cannot earn daily bread for yourself with the payment here, let alone for your family,” he continued.

D said his initial wage was VND2.6 million ($124.8) a month, but since he was switched to taking care of the dock rather than repairing it, he is not sure what his wage will be.

“I have no idea how much wage is left, yet I’m granted VND2 million a month to buy food.”

While the wages of some crew members have been halved, the company has also delayed their payments for months.

“I’ve worked for the ship for more than a year now, but the company still owes me six months of salary,” said Nguyen Van Toi, the youngest crew member on the Song Gianh.

“Although the contract has yet to end, I’m writing a resignation to look for another job.”

Meanwhile, Hoang Dinh Long said he could not afford medical treatment for his 2-year-old son due to the debt owed him from Vinalines.

“The company has yet to pay me salary for March and April,” he lamented.

Coffee farmers urged to replace aging trees

The Government should draft a plan to replant coffee trees and subsidise the costs to ensure the sustainable development of the coffee industry, a conference heard in Ho Chi Minh City on May 14.    

The industry has grown strongly in terms of area, output, and productivity, contributing greatly to socio-economic development in the Central Highlands region, participants agreed.

The area under the crop, for instance, has expanded from 119,000ha in 1990 to 537,000ha last year. The country produces more than one million tonnes a year and ranks second in exports.

But unplanned development threatens its sustainability, Le Ngoc Bau, head of the Tay Nguyen Agriculture and Forestry Science Institute, told the conference.

“The area under old coffee trees is increasing, and if the country does not have a programme to replant them, most coffee trees in Vietnam will be old and stunted.”

He explained old and stunted trees as being more than 20 years old and having an annual average yield of less than 1.5 tonnes per ha.

Without replanting, output and exports will plummet, he said.

The replanting task has become easy with the Government spelling out the process for this, he said.

After cutting down the old trees, farmers need to grow other crops for at least two years before planting new trees, he said.

His institute has created many high-yield and high-quality coffee strains that will help improve the competitiveness of Vietnamese coffee products, he said.

The replantation will also be a good opportunity for Vietnam to expand the area under Arabica coffee, which fetches higher prices than Robusta coffee. Arabica accounts for just 6.3 percent of the plantation area now.

But many farmers could not afford the replantation since the average cost per ha is around VND100 million (US$4,800), he said, adding that the Government should subsidise them like in Colombia and India.

Currently, most coffee export contracts are based on models proposed by buyers and in accordance with general European contract requirements.

This secures the buyers’ interests but could cause risks to sellers, Nguyen Huu Chi, a member of the Vietnam Competition Council warned.

To mitigate such risks, the Vietnam Coffee and Cocoa Association (Vicofa) has come up with a draft of a contract for coffee exports and is seeking coffee exporters’ opinions, he said.

Luong Van Tu, Vicofa chairman, said many exporters do not opt for legal advice for signing and implementing contracts or resolving disputes, and know little about international trade, leaving them at a disadvantage compared to their foreign partners.

They need to redress this situation, he said.

Standard Chartered predicts 10.9 pct inflation in QII

Standard Chartered Bank has forecast that the nation’s inflation rate in the second quarter will ease to 10.9 percent, before dropping back into single-digit territory in the third and fourth quarters.    

Inflation in March fell to 14.1 percent from a peak of 23 percent last August, the bank noted.

Moderated inflationary pressure, coupled with an improved balance of trade and foreign reserves, should provide the State Bank of Vietnam (SBV) with ammunition for further interest rate cuts during the rest of the year, said the bank. They also predicted that the refinance rate would be cut to 12 percent this second quarter and to 11 percent by the end of the year.

“This is broadly in line with the State Bank of Vietnam’s target of reducing policy rates by 1 percent each quarter this year, given that inflation continues to slow,” a spokesperson for the Bank said. Following its first rate cut this year in March, the State Bank again cut key rates on April 10. The refinance rate sits at 13 percent, while the discount rate is down to 11 percent.

The policy of keeping rates low to cool inflation has been effective, but there was an added need to keep the economy from losing momentum this year.

Rate cuts signal that economic growth is gradually becoming once again a policy focus for the State Bank, following 12 months of a price-stability drive.

State Bank Governor Nguyen Van Binh has said that growth this year was expected at around 5.5-6 percent, down from 6-6.5 percent previously.

The Government will strive to ensure a “reasonable level” of economic expansion, although inflation still remains its main priority, Binh said.

With inflation down to 14.1 percent in March from its peak of 23 percent seven months earlier, and a stable currency, the State Bank had room to shift its attention to reinforcing economic growth, Standard Chartered said.

“Although growth is at its record low since 2009, there are reasons to remain optimistic,” the bank said.

During the 2009 downturn, the economy grew at a respectable 5.3 percent even though the first-quarter growth was a meager 3.1 percent.

The bank therefore maintained its forecast of 5.8 percent growth this year, with a pace in the second quarter of 5.4 percent to gradually accelerate to 6.4 percent and 6.6 percent in third and fourth quarters, respectively.

Standard Chartered has also forecast that two-year Government bond yields would ease to 10.6 percent this year, down from the current 10.8 percent.

HXN30 Index to be launched in Q2

The Hanoi Stock Exchange (HNX) has plans to launch the HNX30 Index into operation in this quarter to meet increasing demands of investors and the market.

Like the VN30 Index for the southern bourse, the HNX30 Index will track the movements of the 30 leading shares by market capitalization and liquidity. Its calculation methods rely on the free float rate, meaning shares that are freely transferable, and liquidity factors, or the amount of shares traded per day.

Enterprises chosen in the basket are those meeting standards of liquidity and listing scale. They are not under supervision, warning or restricted trading on the exchange.

According to a representative of HNX, the new benchmark will help develop index-based trading products such as ETF (ended trust fund) and stock index futures contract. HNX has completed operation conditions for the index so far.

The HNX30 Index will be put under a management committee with independent experts and the HNX. Stock selection and capitalization ratio will be revised every six months.

HNX also expects to build up HNX50 Index and other market indices in the coming time.

Dealing with bad debts: a thorny problem

The project to restructure State-owned enterprises (SOEs) is aimed at settling all bad debts by 2015, but this is a hard nut to crack.
    
Hoang Tran Hau, Deputy Director of the Academy of Finance, says debt trading companies are one of the important tools for dealing with bad debts of SOEs, but these companies can not clear all.

In Japan, debt trading companies can only handle 10 percent of bad debts, he says, but this small figure can encourage businesses to develop.

In Vietnam, the Debt and Asset Trading Corporation (DATC) under the Ministry of Finance (MoT) is in charge of tackling the issue.

Despite some successful transactions, there remain doubts about its capacity.

Senior financial expert Dang Van Thanh says DATC is responsible for both trading debts as goods and dealing with debts to serve the restructuring of SOEs as assigned by the State.

However, with many SOEs still at a loss what to do, DATC is not ready for any strong action to deal with huge debts of 1,309 SOEs, Thanh says.

He cites another problem that is the lack of capital for DATC operation as expected. He proposes that the corporation mobilize capital by issuing bonds and using debts bought from SOEs to capitalize itself.

State capital is not enough for DATC to operate effectively, so it has to leverage up, he argues.

DATC Deputy CEO Pham Manh Thuong says there are 20 other debt trading companies in Vietnam. These companies are responsible for the management and settlement of parent banks’ debts. They are legally entitled to buy other banks’ debts but, in fact, no banks want to sell their debts to others.

Former Minister of Planning and Investment Tran Xuan Gia says asset pricing is another challenge to the equitization, restructuring and reorganization of SOEs.

Asset pricing should be done via public bidding or carried out by a reputable independent agency, he says.

DATC Deputy CEO Thuong says as there is not enough pressure to bear upon financial institutions to deal with bad debts, it sometimes takes from six months to a year to complete negotiations for debt trading.

He emphasizes the need to open the market for debt trading which he believes will make the settlement of bad debts and restructuring of SOEs worth a try.