CPI in May likely to rise 1.2%-1.3%: ministry

 

Vietnam’s consumer price index in May is forecast to continue to increase 1.2-1.3 percent over April since the prices of many goods in the world market are witnessing sharp increases, according to the Ministry of Industry and Trade.

 

However, the rising pace will be slow afterwards since global economies will start to be able to control inflation, hence a lower pressure on the Vietnamese market.

 

Also, due to decreasing purchasing power, suppliers will have to find ways to control price increases in the future.

 

Vietnam's CPI in Jan-April surged 9.64 percent, far exceeding the 7 percent target estimated by the government earlier this year.

 

Vietnam Prime Minister, Nguyen Tan Dung, has also asked to control the whole year inflation to under 12-13 percent.

 

At the recent 44th annual meeting of Asian Development Bank (ADB) held in Hanoi, Minister of Planning and Investment Vo Hong Phuc said that the country's inflation target in 2011 would be 11.75 percent, equaling the figure in 2010.

 

United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) has forecast Vietnam's inflation in 2011 is likely to hit 15 percent, said its socio-economic situation survey report in Asia-Pacific.

 

Dutch dairy firm continues upgrade of plant

 

The Dutch-owned FrieslandCampina Vietnam has begun the second phase of the upgrading to its pasteurized-milk plant in Thuan An District, Binh Duong Province.

 

The plant would be equipped with the latest generation of automated fillers which can mitigate human errors in running the system, thus ensuring food hygiene and safety for milk products, Jan Wegenaar, operations director of FrieslandCampina Vietnam, said.

 

The company is carrying out the upgrade, which will wrap up in 2012, in four main stages at a cost of more than US$13 million.

 

Savills ties up with North American alliance

 

International real estate advisor Savills has announced the formation of a strategic alliance with CresaPartners LLC – North America’s largest specialized tenant representation firm.

 

The arrangement will see Savills and CresaPartners providing a tenant representation service to international clients in Europe, Asia Pacific and North America.

 

CresaPartners comprises over 55 offices across North America with over 775 employees. Headquartered in Boston, it was formed in 1993 and is now North America’s largest corporate real estate advisory firm that exclusively represents tenants. Together, Savills and CresaPartners will have a global platform of over 250 offices.

 

“This new strategic alliance with CresaPartners will now enable us to better service the needs of these clients as they expand into new markets. It will also give CresaPartners' clients access to the Savills international network of offices in particular our very strong Asian business where we are seeing an increased demand for space from all sectors,” said Jeremy Helsby, CEO of Savills plc.

 

“This alliance will allow us to provide client service seamlessly across global markets,” said Bill Goade, CEO of CresaPartners.

 

“Increasingly we are seeing North American clients needing to expand into Asia Pacific and Europe, and Savills extensive platform of offices and expertise in these markets will provide significant benefits for our clients,” he added.

 

“With our strong combined platform, we are well placed to assist with US companies expansion plans in Asia Pacific and Europe as well as Asian and European tenants who are now entering and expanding into the established and new American markets,” said Brett Ashton, Managing Director of Savills Vietnam.

 

Businesses starved for capital

 

Capital is the most important issue to Vietnamese enterprises, particularly small- and medium-sized ones, a seminar in Ha Noi on capital solutions for businesses heard yesterday.

 

A survey by the Viet Nam Chamber of Commerce and Industry found the top priorities of businesses were all capital, said chamber chairman Vu Tien Loc. But while almost 75 per cent of companies tried to seek loans from commercial banks, only one-third had access to bank financing.

 

Participants all agreed high lending rates – which could reach 22-27 per cent per year at several banks (plus other fees) – made businesses avoid borrowing. In addition, many SMEs often had difficulty meeting bank requirements on collateral or project feasibility criteria.

 

Dr Nguyen Thi Mui, director of Vietinbank's Training and Human Resource Development Centre, said around 90 per cent of capital of credit institutions was borrowed from other organisations in the economy and deposits of enterprises had recently fallen by more than 19 per cent.

 

"Thus some banks offer higher deposit rates, leading to increasing interest rate base for borrowing," Mui said. She suggested the Government and the central bank support capital for banks and severely fine those violating the interest rate cap in order to reduce lending costs for business.

 

The chamber said that besides seeking bank loans, enterprises could mobilise capital through issuing stocks and bonds, purchasing goods on credit or joining hands with other companies.

 

However, though the stock market was considered an important channel for businesses to mobilise capital, massive issuances of shares could lead to oversupply on the market and, along with the prolonged downtrend recently, had made this channel less effective for raising capital.

 

Do Ngoc Quynh, general secretary of the Viet Nam Bond Market Association, said that along with stocks, issuing corporate bonds also helped business mobilise capital efficiently.

 

"Corporate bonds can help enterprises secure a flexible and long-term capital source, enabling them to use capital actively," Quynh said, adding that if companies issued convertible bonds, they must pay low interest rates and bond issuers could avoid bank barriers when accessing credit.

 

Last year, around VND45 trillion (US$2.17 billion) worth of corporate bonds were issued successfully, higher than the VND30 trillion ($1.45 billion) of the previous year, which showed corporate bonds were workable for businesses, particularly those with feasible projects, Quynh said.

 

Viet Nam's bond market currently accounts for just 8-9 per cent of the nation's gross domestic product, which is very small compared with Japan, 200 per cent; Malaysia, 81 per cent; or China, 52.4 per cent.

 

However, to increase companies' abilities to raise capital through corporate bond issues, Quynh said companies, particularly SMEs, needed to improve capital efficiency, enhance management transparency and develop a habit of using professional consultancy for their underwriting.

 

He also suggested the establishment of a professional credit rating organisation for issuers.

 

Surveying Italian agro-forestry and seafood market

 

A Vietnamese trade and investment promotion delegation led by Deputy Minister of Agriculture and Rural Development, Diep Kinh Tan has paid a five-day visit to Italy.

 

On May 9-10, the 23-member delegation worked with leaders of the Italian Ministry of Agriculture (IMoA) and its departments and the Quality Management Department under the Italian Ministry of Health.

 

The two sides discussed cooperative opportunities to strengthen trade relations between the two countries in line with the fine development of political relations. The Vietnamese delegation urged leaders of the IMoA and relevant agencies to create favourable conditions for Vietnamese agro-forestry and seafood products to penetrate the market.

 

The Italian side pledged support for Vietnamese products and asked Vietnam to do the same. They agreed to arrange for Minister of Agriculture Francesco Saverio Romano and Italian business delegation to visit Vietnam soon.

 

The two sides also agreed to promote the exchange of products within the framework of bilateral trade commitments.

 

Earlier, from May 6-8, the delegation attended the “Tutto Food 2011” fair in Milan and organised a seminar on Vietnam’s trade and investment promotion in Italy.

 

The delegation left Italy on May 11 for Spain to survey the market there.

 

Vinatex steps up garment exports to Japan

 

Vietnam National Textile and Garment Group (Vinatex) and Japan’s Marubeni Corporation signed a memorandum of understanding (MoU) on strategic cooperation in Hanoi on May 10, paving the way for further trade exchange between the two countries.

 

Signatories were Le Tien Truong, Deputy General Director of Vinatex and Kasuhita Yabe, Head of Garment Department of Marubeni Corporation.

 

According to Truong, the MoU will help the group expand markets in Japan, call for investment cooperation, training and technical transfer for the sustainable development of the two countries’ garment sectors and the partner groups.

 

As a large and multifunctional group, Marubeni will quickly create partnerships with Vinatex member companies and branches to trade in garment products in Japan, he added.

Vinatex statistics show that Japan is Vietnam’s third largest garment importer, with an average growth rate of 12 percent per year.

 

Since the Vietnam-Japan Economic Partnership Agreement came into force on October 1, 2009, Japanese tariffs on Vietnam’s garment products have fallen to zero percent, creating more favourable conditions for Vietnamese garment exporters.

 

Public procurement role in WTO highlighted

 

The Ministry of Planning and Investment and the Secretariat of the World Trade Organisation (WTO) jointly held a seminar entitled “Government Procurement Agreement within WTO” (GPA) in Hanoi on May 10.

 

Addressing the event, Deputy Minister of Planning and Investment, Dang Huy Dong, said that the event offers Vietnam a chance to gain an understanding of GPA and its effects on developing countries, as well as paving the way for Vietnam’s accession to the agreement.

 

Robert Anderson, WTO Counsellor and Head of the Government Procurement and Competitive Policy Unit said that GPA member countries would benefit from approaching guaranteed procurement markets to avoid the effects of protectionism, and also increase the value of spending money in each country’s procurement system and attract more foreign direct investment.

 

At the event, delegates discussed the increasingly important role of government procurement and GPA in the global economy, the changing characteristics of GPA over time and the expansion of its application scope to provide greater benefits for member countries.

 

GPA’s main contents focus on transparent regulations on public procurement, benefits to all member countries as well as procedures and bidding processes for public procurement.

 

Domestic auto sales down 3 per cent during April

 

Total domestic auto sales dropped to only 9,400 units during April, a 3 per cent decrease according to Viet Nam Automobile Manufacturers' Association (VAMA).

 

Only 63 bus chassis were sold during April, a 94 per cent decrease compared to the same period in April 2010.

 

The VAMA further confirmed that only 5,650 commercial vehicles had been sold last month, a year-on-year decrease of 23 per cent.

 

Private car sales went up with more than 2,380 units purchased, an increase of 32 per cent compared with the same period last year.

 

The VAMA said that, from January to April of this year, its members had sold 37,306 units including 6,511 sport-utility vehicles, multi-purpose vehicles and cross-over vehicles, 8,880 private cars and more than 15,760 commercial vehicles, an increase of 20 per cent compared to 2010.

 

Vinamilk and Nutifood commit to keep dairy prices stable

 

Vinamilk and Nutifood, two leading manufacturers of dairy products and baby food, signed an agreement not to increase the prices of milk powder for children and the elderly yesterday.

 

The deal took place during a meeting with the HCM City Department of Industry and Trade regarding the City's price stabilisation programme.

 

The current number of goods includes 6,000-6,300 tonnes of products which accounts for around 30-35 per cent of market demand in terms of children and the elderly in HCM City.

 

Although the two companies committed to keep dairy prices unchanged until the end of 2011, despite possible increases in input cost, both companies are not subject to capital support by the City authority.

 

Tran Huu Duc, head of the external affairs department at Nutifood, said that his company selected the two lines of products in commitment better support child and elderly consumers.

 

In response to potential market price fluctuations, Duc said that his company planned to balance income and expenditure in terms of other product lines in order to help keep prices stable.

 

Le Ngoc Dao, deputy director of the HCM City Department of Industry and Trade, said that the two companies are set to complete price registration at the City Department of Finance for appraisal. Retail prices on the two lines of products will be announced early next week.

 

In addition, to support business, the City department, in coordination with relevant departments, will disclose nutritional indicators on milk products in the market to enable consumers to choose the best products.

 

HCM City is currently implementing a price stabilisation program aimed at four commodity groups including food, medicine, milk and other items in preparation for the coming school season. Total program spending of is set to reach VND412 billion (US$19.8 million).

 

State Bank halts licences for new ATMs

 

The State Bank of Viet Nam has announced that licences for transaction offices or departments, savings funds and Automatic Teller Machines (ATM) for commercial banks have been suspended.

 

However, many commercial banks, including Vietcombank, disagreed with the State Bank's decision to suspend commercial banks setting up ATMs, said Nguyen Thu Ha, chairwoman of the Bankcard Association.

 

The association has requested that the State Bank reconsider the suspension of setting up more ATMs, saying that ATMs should not be regarded as transaction offices or departments of commercial banks.

 

The State Bank also said that commercial banks should wait for an upcoming circular that will give the banks further guidance.

 

In the past, commercial banks only needed to register to set up ATMs instead of asking for a licence. As of the end of 2010, the country had 11,700 ATMs, an increase of 20 per cent over the same period in 2009.

 

European firms more cautious about Vietnam prospects

 

High inflation, the weakening Vietnamese dong and increasing business costs have made European investors more cautious about the country’s business prospects, said the chairman of the European Chamber of Commerce in Vietnam (EuroCham).

 

Alain Cany pointed out European investors’ major concerns about Vietnam on Monday when EuroCham released the results of its third quarterly business climate index survey for the second quarter of this year.

 

The survey conducted among around 200 EuroCham members showed up to 72% of respondents expected high inflation of more than 10% in Vietnam this year, up from just 47% of those holding this view in the first quarter of this year.

 

As for the dong/U.S. dollar exchange rate, 52% of respondents projected the local currency to weaken by 6-8% or remain unchanged by mid-2011, while 57% expected it to depreciate 8% or more against the greenback by the end of the year.

 

The respondents’ prediction of dong value is probably a surprise in the survey carried out in late April when the forex market had remained stable and confidence in the dong had improved much since the local currency depreciated by 9.3% over the dollar in February.

 

Overall, the survey revealed business confidence among European businesses in Vietnam has dropped by 9 index points compared to the last survey, resulting in the EuroCham Business Climate Index of 70 for the second quarter.

 

“The fall of the EuroCham Business Climate Index from 79 to 70 appears to be largely due to increasing concerns about inflation and the weakness of the dong,” Cany said. But he noted the index still reflected the overall confidence of EuroCham members in Vietnam’s business prospects.

 

Although the responses by EuroCham members remained largely positive, the respondents were more cautious this time because the number of businesses describing their situation as ‘neutral’ rose from 19% to 28% while those stating a ‘good’ or ‘excellent’ business situation fell to 56% from 64% in the last survey.

 

EuroCham said its members provided mixed responses to a business outlook of Vietnam as 51% had a ‘good’ or ‘excellent’ outlook for their enterprise, a significant fall from 72% in the last survey. Companies with a ‘neutral’ business outlook increased to 33% from 20%, and with a negative business view doubling from 8% to 16%.

 

The survey found 53% of the respondents anticipated Vietnam’s economy to grow 6% or lower, up from 26% last time. But 47% of respondents expected 8% or higher growth of their own business sector. EuroCham said this presented a slight decrease from the last survey, but was still positive.

 

In terms of investment plans for 2011, 51% of the respondents wanted to increase their investment and 26% planned to keep the same level. But, there was a notable change in the latest survey as the companies opting for a significant increase in their investments sank from 32% to 18%.

 

EuroCham members forecast significant salary increases, as 59% expected salaries for skilled employees to rise by more than 10% this year, up from 54% in the previous survey. For unskilled labor salaries, 45% projected a rise of over 10%, up from 36% last time.

 

Matthias Duhn, executive director of EuroCham, said the organization’s members were increasingly concerned about the volatile macro-economic environment in Vietnam.

 

“EuroCham therefore believes the key challenges for Vietnam’s leadership in 2011 will be maintaining investor confidence in macro-economic stability, in particular by balancing carefully growth and inflation, and emphasize growth in the added-value industries,” Duhn said.

 

EuroCham chairman Cany said Vietnam was still in the mind of new European investors who probably placed this market second after Indonesia in the ASEAN region. However, he warned Vietnam would miss the opportunity to attract more European companies if there was not drastic improvement in its macro-economic situation.

Samsung expects high phone export revenues

 

Samsung Electronics Vietnam Co., the operator of a cell phone factory in the northern province of Bac Ninh, is expected to gain US$1.9 billion from mobile phone exports this year, the company said.

 

The company had obtained US$1.6 billion in phone exports between October 2009 when its factory was launched in Bac Ninh and the end of 2010. Given this year’s target of US$1.9 billion, its cumulative export revenue would hit US$3.5 billion. Samsung said in a statement released on the occasion the company held its recruitment day in Hanoi in late April.

 

The company once said that cumulative export earnings from this phone factory were predicted to amount to US$16 billion by 2015.

 

Samsung Electronics Vietnam Co. is the first and only complete hand-phone factory in Vietnam to date. The phone manufacturing project has become the largest in terms of scale and the most successful production base of Samsung outside Korea.

 

Vietnam is the fifth country where Samsung Electronics has phone production facilities after South Korea, China, India and Brazil.

 

Operations of the phone facility in Yen Phong Industrial Park have attracted many manufacturers who have been licensed there to supply parts and accessories to Samsung Electronics.

 

Relating to the Samsung’s recruitment day, nearly 1,200 students from three major universities in Hanoi joined the event that was held following Global Samsung Aptitude Test standards.

 

Some 300 applicants employed from the recruitment day will work at the company in late June. The new staff will work at departments like Research & Development, cell-phone production, vacuum cleaner and camera production.

 

According to Samsung, the Korean investor is considering an expansion plan to turn its factory into a complex manufacturing a wide array of ICT and electronics products, including laptops, printers, cameras and vacuum cleaners.

 

“Recruiting more people will help us carry out Samsung’s plans in Vietnam well. I believe that the young talent in Vietnam will help us achieve important growth in Vietnam in the future,” Yoo Young Bok, general director of Samsung Electronics Vietnam, said in the statement.

 

The company now employs more than 7,000 local people and has 90% of its products exported to 52 countries and territories in Southeast Asia, the Middle East, Africa, and Europe.

 

Access to dollar loans harder for enterprises

 

Access to bank loans in U.S. dollar was officially choked off on Monday as Circular 07 issued by the central bank took effect, meaning enterprises will have to burden higher capital costs when borrowing Vietnam dong at an annual interest rate of over 20%.

 

Enterprises wanting to borrow dollars at banks must have income in this foreign currency from their core business operations, or have a written commitment from a credit institution to sell dollars to them to pay debt upon maturity, according to the circular.

 

Do Lam Dien, deputy director of Corporate Banking at Maritime Commercial Bank, said the circular would effectively force banks to tighten their purse strings towards enterprises’ demands for dollar loans for a lower lending rate. That means those enterprises wanting to perform ‘carry trades’ now find it difficult to source cheap funds from dollar pools.

 

The circular thus places another burden on both banks and borrowers, who have already suffered from the credit growth cap of 20% for all banks this year. In April, the dollar credit growth and deposit mobilization at Maritime Bank increased a little, Dien said.

 

April figures of the central bank’s HCMC branch also showed that the credit growth rates in both the U.S. dollar and the dong rose a mere 0.3% from March, while the mobilization of both currencies inched up by the same level of 0.5% in April. In previous months, the dollar credit growth was always far higher than that of the dong.

 

Given stricter conditions to access dollar loans, bankers said, enterprises will have to turn to derivative products like options and forwards to ensure dollar funds in the future for payment.

 

Circular 07 is part of the central bank’s effort to fight ‘dollarization’ in the economy.

 

Instruction 01 issued on March 1 by the State Bank of Vietnam mentions that measures would be taken to crack down on dollarization in Vietnam, including a move to gradually replace dollar mobilization and lending with dollar buying and selling. This policy is meant to curb inflation and stabilize the economy.

 

A senior executive of a joint-stock bank said that if banks have to eliminate the U.S. dollar from their balance sheets, their total assets will shrink, and that would be a challenge for banks to maintain their current sizes with only one currency.

 

The inter-bank exchange rate between the dong and the dollar on Monday was VND20,708 while banks sold the dollar for VND20,660.

 

The dollar price on the unofficial market was even lower than at banks, at VND20,650 last night, down VND2 from late last week.

 

Hanoi sees 20% drop in remittances

 

Inward remittances through commercial banks in HCM City dipped by 19.6 per cent against March to US$367.6 million in April due to economic turmoil and the return of many Vietnamese workers from countries facing political instability, the State Bank of Viet Nam's branch in the city announced.

 

A top official from the State Bank of Viet Nam also confirmed with Viet Nam News that total inward remittance sent to the country was down more than 10 per cent. However, he refused to release the exact number.

 

Some investors blamed the decease on the 3 per cent cap on US dollar deposits. "The 3-per-cent cap has very little effect on the level of remittances," Deputy General Director of Vietinbank covering treasuries Le Duc Tho told Viet Nam News.

 

"The decline could be based on two reasons. Firstly, not all remittances sent to Viet Nam are kept in banks; the receivers may have poured them into other investment channels. Secondly, people are still sending remittances to the country and exchanging the currency for Vietnamese dong to enjoy high interest rates."

 

Le Xuan Nghia, deputy chairman of the National Financial Supervisory Council, said: "Even when Viet Nam cuts interest rate for the dollar, the rate is still higher than the common rate in other countries."

 

Nguyen Thanh Toai, deputy general director of the ACB shared this view but refused to disclose the amount of the remittances his bank had processed.

 

In April, when the cap came into effect, the Viet Nam Association of Financial Investors (VAFI) said that the 3-per-cent cap would not affect overseas remittances as no countries in the world would raise their foreign currency deposit interest rates to a "too high" level for the purposes of attracting overseas remittances.

 

Earlier this year in a Government report, annual overseas remittances to Viet Nam were expected to rise at least 6 per cent to $8.45 billion, from around $8 billion last year.

 

In 2010, total inward remittances sent to Viet Nam reached $8 billion, in which remittance sent to the country to enjoy high interest rates were estimated at under just $1 billion, remittances from overseas labourers accounted for $4.3 billion, and the remaining $3 billion was an annual stable source of finance from people living abroad, Nghia said.

 

Work starts on last stage of Nhat Tan Bridge

 

Work started yesterday on the last part of the Nhat Tan Bridge project in Ha Noi.

 

Work on the VND1.3 trillion (US$63.4 million) third and final stage is a joint venture between Japan's Sumitomo Mitsui Construction Company and Viet Nam's Import-Export Construction Corporation (Vinaconex).

 

Work will include a 576-metre access road, a flyover in Phu Thuong Commune and a 675-metre ramp to the south of the bridge.

 

Work is due to be completed within 34 months.

 

The first part of the project, which began on March 2009, involved the building of a link road to the north of the bridge. Its total investment was VND1.8 trillion ($87.8million). Work started on the second part of the project in October.

 

Initial plans called for work on the 3.9-km bridge connecting Tay Ho and Dong Anh districts on either side of the Hong (Red) River to be completed by 2012 but land clearance problems delayed the project.

 

The Nhat Tan Bridge will be the longest cable-stayed bridge in Viet Nam. It will be 33.2m wide and have four traffic lanes – two for buses and two for cars, lorries and motorbikes.

 

Funding for the project will come from Japanese official development assistance and the Vietnamese Government.

 

The bridge, one of seven to span the Red River, is expected to shorten travel time from the city centre to Noi Bai International Airport, as well as industrial zones and urban areas such as North Thang Long-Van Tri, Dong Anh-Co Loa and Gia Lam-Yen Vien.

 

Thanh Hoa to build bagasse-fueled power plant

 

The Thanh Hoa province People’s Committee has licensed a project to build a bagasse-consumed power plant with capacity of 12.5 MW.

 

The plant, run by the Lam Son Sugar Joint Stock Company (LASUCO), will use bagasse from LASUCO’s subsidiary, sugar factory 2, to generate electricity. It is expected to help reduce environmental pollution along with increasing the company’s profits and income for its employees.

 

The project is scheduled to come into operation in December this year.

 

Vietnam seeks agro-forestry boost for Italy

 

Deputy Minister of Agriculture and Rural Development Diep Kinh Tan has proposed Italy’s Agriculture Ministry and relevant agencies facilitate further penetration of Vietnam’s agro-forestry and fisheries products in the country.

 

Deputy Minister Tan made the proposal at his working session with representatives of the Italian Agriculture Ministry during his recent five-day working visit to the country.

 

The Italian side said they would arrange a visit to Vietnam in the near future by Minister of Agriculture Francesco Saverio Romano and a business delegation, to seek investment opportunities.

 

Both host and guest agreed to promote their products to further boost bilateral trade.

 

Tan acknowledged Italy’s financial capacity and processing industry, calling for Italian investment in processing value-added products in Vietnam.

 

The Italian representatives pledged to seek ways to cooperate under the form of joint ventures or wholly Italian-invested projects.

 

In another working session, with the Italian Health Ministry’s Quality Management, the Italian side highly valued Vietnam’s products, especially seafood.

 

While in Italy from May 6-10, the Vietnamese delegation attended the Tutto Food Fair 2011 in Milan and organised a seminar to promote Vietnam’s trade and investment in Italy.

 

Deputy Minister Tan told the Vietnam News Agency correspondent in Italy that Vietnamese businesses should enhance trade exchanges with their Italian partners, to fully exploit opportunities in a large market with growth potential.

 

PV