Market management co-operation with neighbour nations tightened
 
Two memoranda of understanding were signed yesterday to boost market management co-operation between the Market Watch Department under the Ministry of Industry and Trade Ministry and its counterparts in Laos, Cambodia and Myanmar.

Under the MoUs, each side will exchange information on mechanisms, policies and legal documents, collaborate to run action programmes and organise training courses to improve the skills of market watch staff.

The memoranda were signed at the first market watch co-operation conference hosted by Viet Nam yesterday.

The conference aimed to help the four countries thoroughly understand their functions and duties in controlling the market to effectively run the memoranda.

All four sides admitted that shortcomings remained in their ability to control the market due to imperfect legal frameworks and poor co-operation among relevant agencies.

Deputy Minister of Industry and Trade Nguyen Cam Tu said the move aimed to reinforce economic and trade co-operation among the countries, especially between Viet Nam's Ministry of Industry and Trade and the Commerce Ministries in each of the other countries.

The countries would take turns organising the conference yearly, said Director of the Market Watch Department Nguyen Hung Dung.

Preparations for competitive power market ‘too sluggish'

Deputy Prime Minister Hoang Trung Hai has urged relevant ministries and sectors to speed up preparation for the operation of a competitive power market.

Hai asked for the completion of the plan that calls for a competitive power-generation market by November 15, a month and a half ahead of the its proposed start next year.

The pilot market plan was launched on July 1 by the Ministry of Industry and Trade (MoIT), and after four months of operation, most power plants are participating and offering prices either directly or indirectly through their representatives, according to Hai.

Power-generation agencies are increasingly using information technology as a base for collecting, processing and delivering power prices on the market.

Hai, however, cited some shortcomings, including the instability of the Supervisory Control and Data Acquisition system, errors in power demand expectation, and improper regulations in the market's introduction.

A competitive power market aims to secure equal competition in power production and equal pricing of electricity, improve production efficiency, and attract more resources of funding for power generation. As the power generation market becomes more developed, customers will have more opportunities to select power providers.

The market will operate under the model of a cost-based pool in which power producers have the right to offer power prices based on the market.

The MoIT has been asked to complete a plan to set up a national power regulation council.

The ministry has also been asked to revise legal documents on the power market, particularly on the adjustment of ceiling prices offered by power plants based on fuel prices.

Binding conditions regarding power consumption would be added to contracts on Build-Operate-Transfer projects' power trading. The MoIT will supervise Electricity of Viet Nam (EVN) on transferring power-trading contracts and gradually adjusting power prices offered by power plants to be in accordance with the market. This would help investors to cover additional expenses caused by increased interest rates and fuel prices.

The EVN must complete a plan on the competitive power market and submit it to the MoIT before November 15, according to Hai.

The deputy PM also asked the EVN to put in place a basic information-technology infrastructure, connecting it with power plants which are not under EVN's management. He ordered it to be done before next Tuesday.

The development of a competitive power market is a long-term strategy contained within the country's 2004 Law of Electricity.

The market upgrade contains three plans: competitive power generation from 2005 to 2014, competitive power trading in the following eight years, and retail sales of power after 2020.

HDBank hauled up for interest rate breach

The State Bank of Vietnam yesterday threw the book at the Ho Chi Minh City Development Commercial Joint Stock Bank, or HDBank, for violating the deposit interest rate cap last month.

On October 4 a depositor tipped off that a branch of the bank in HCMC’s Tan Binh District offered him 15 percent, 1 percent more than the central bank ceiling.

The SBV then inspected the bank’s head office and some other branches and found similar violations.

The central bank, calling it a “deliberate systemic violation,” ordered HDBank to cap its credit growth at 10 percent next year and not to open new branches, transaction offices, or ATMs for a year starting November 20.

It also ordered the dismissal of the bank’s deputy CEO Dam The Thai, while deputy standing chairwoman Nguyen Thi Phuong Thao, deputy chairman Nguyen Huu Thanh, CEO Nguyen Huu Dang, and general supervisor Dao Duy Tuong received warnings.

Many other officials at the head office and two branches have been sacked or demoted.

In a press release yesterday, HDBank admitted some of its branches had breached the ceiling rate to meet targets.

On September 7 the central bank had issued a directive to banks to strictly follow the 14 percent deposit rate ceiling, warning tough penalties for violations, including dismissal of their chief executives and a ban on branch expansion.

Earlier, on September 15, the central bank found a similar breach at a Dong A Bank branch in the southern province of Tay Ninh; it had offered 15.5 percent interest.

Nguyen Thai Hau, the bank’s director in Tay Ninh, was dismissed and barred from working again at the branch for three years.

Lam Thi Minh Anh, head of accounting in Tay Ninh, was also sacked.

The bank has been barred from opening new branches, transaction offices, or ATMs for a year.

Local banker dismissed on offering high depositing rate

The State Bank of Vietnam (SBV) has asked HDBank to relieve its deputy director Dam The Thai of his post over wrongdoing in offering high depositing rate exceeding the SBV’s ceiling rate to customers.

In addition, Nguyen Thi Phuong Thao, vice president of the bank’s Standing Board, Nguyen Huu Thanh, vice chairman, Nguyen Huu Dang, board member and CEO, Dao Duy Tuong, head of inspection board and the board of HDBank leaders have also warned and request for review on serious violations occur in the payment of commissions savings for depositors.

SBV has also asked the bank to handle personal responsibility for a number of positions at its headquarter and three other branches.

At the headquarter, Tran Thu Huong, head of individual customer department and Vu Anh Thu, head of non-credit body under the department of marketing and product development for individual customers, have also required to be sacked.

SBV also asked the board of HDBank to fire Ton Cam Thanh and Nguyen Loi Vu, the managers of Tan Binh and Van Hanh branches. Particularly, Nguyen Van Hieu, director HDBank Nguyen Dinh Chieu branch, will be transferred to other position.

In addition, the central bank also asked the board of HDBank to demote and dismiss other related individuals.

In terms of business, the bank’s board has to issue a written HDBank deregulation of offering brokerage commissions to lure depositors, and retake the amount of VND187.2 million set aside for such payment. Private commissions worth nearly VND52.9 million paid for Tan Binh branch’s customers must also be recover.

Within one year from the date of November 20, HDBank is not allowed to open branches, transaction offices, amd ATM's throughout the country.

SBV has also assigned a credit growth of 10 percent in 2012 for the bank and asked it to focus strengthening the organization, limiting credit growth, examining and reviewing the entire system from now to the end of 2012.

The bank has to report to the central bank about the implementation by the end of this month.

Vietnam's Petrolimex seeks up to 1.05 mil T gasoil for 2012: trade

SINGAPORE on Sun Nov 13, 2011 at 9:25pm EST - Vietnam's Petroleum Import-Export Corp., or Petrolimex, is seeking up to 1.05 million tonnes of gasoil for delivery over January to December next year through a tender, industry sources said on Monday.

The state-owned company is seeking up to 30 cargoes of 35,000 tonnes each of 0.25 percent and 500 ppm sulphur gasoil for loading from Asia.

Twelve of the cargoes are to be loaded from Korea, Japan's Okinawa port or North China, 10 cargoes loaded from Taiwan or South China and eight cargoes from either Singapore or Thailand.

The tender closes on Nov. 16 and is valid until Nov. 22.

While the contract is for a year, the price will be reviewed every six months, one of the sources said. The volumes the company will require for next year appear to have reduced from its current contracts, but the reason for the reduction was not clear.

Petrolimex has a current term with five suppliers, including Kuwait Petroleum Corp. and South Korea's SK Energy to import about 1.26 to 1.52 million tones of 0.25 percent and 500 ppm sulphur gasoil for this year.

It paid premiums ranging from parity to about 10 cents a barrel for the 500 ppm sulphur gasoil and at discounts of 20 to 30 cents a barrel for the 0.25 percent sulphur gasoil, to the 0.25 percent sulphur Singapore quotes.

It’s sell or sink for shipping firms

The huge bank loans many shipping companies took to fund their business are putting intense pressure on them and, with the economy yet to recover, some have resorted to selling their vessels to repay the debts.

Many leading shipping firms like the Vietnam Ocean Shipping JSC (VOS), Vietnam Transport and Chartering Corporation (VFR), Viet Hai Shipping and Real Properties Corporation (VSP), and Vietnam Sea Transport and Chartering JSC (VST) reported losses in the third quarter.

For most of them, interest payment, with the rates being sky-high, was a huge financial burden.

Several opted to sell their assets.

VOS, which reported a Q3 loss of VND51.74 billion (US$2.4 million), put its two oil tankers and another cargo vessel in the market in October.

Insiders expect it to bring a huge sum.

VST sold its Phuong Dong 2 last year and Phuong Dong 1 and 3 this year for VND53.88 billion.

Vinaship JSC sold three of its vessels.

Vietnam can benefit from global economic ‘New Normal’

Vietnam can take the advantage of the global economic ‘New Normal’ to boost its own growth with appropriate strategies and policies, said an expert from UK-based consulting firm Grant Thornton International (GTI).

The ‘New Normal’, beginning with the collapse of Lehman Brothers on September 15, 2008, will make this world’s economic environment become tougher and harder for making forecast and free from any risk-free mindset, said Alex MacBeath, a member of GTI’s Global Leadership Board.

It ignited a new global environment where changes will be constant, and world economy can only be on track to recovery in the next 3-4 years, said the former CEO & Executive Partner of Grant Thornton LLP in Canada.

With the ‘New Normal’, Vietnam needs to diversify its markets, especially Asian market, so that it will not be so dependent on US and EU, since the latter is contracting and will no longer be a stable source of export.

Since some Asian economies, including Vietnam, did not bear the direct impacts from the ‘New Normal’, Vietnamese government should create a strong investment environment to attract investment dollars still sitting on the sideline due to the lack of investors’ fundamental confidence on the stability of the local economy.

“The country should also pay attention to the negative impacts including higher costs of credit with limited accessibility in the short-term and so, uptrend pricing will increasing its pressure on the domestic economy”.

Though the ‘New Normal’ has, to some extent, contributed the fact that Vietnam’s optimism for economic outlook had suffered a second successive fall this year, according to a recent survey of Grant Thornton International, most the problems are domestic only, said Ken Atkinson, Managing Partner of Grant Thornton Vietnam.

The newly released data, a decline from 80 percent in Q1 to 54 percent in Q2 and to 38 percent in Q3/2011, a 14 percent year-on-year and 16 percent quarter-on-quarter fall, said the latest research from Business Report.

“As the new normal creates more challenges, it also offers more opportunities for Vietnam with the utmost important task for Vietnam is to create a new more attractive investment environment,” Ken said.

“The government of Vietnam is well aware of the situation now, and we have heard about selective incentives, some standardized ones, for major multinational companies coming to invest in Vietnam.”

“It is a right approach, and we need more of that ,” Ken added.

“Vietnam should not assume that the capital inflow will automatically choose Vietnam, so it should be more proactive in convincing investors to channel their investment to the country.”

“They prepare to take some risks when investing in the country, but they need to access what the risks really are,” Alex said.

“Vietnam should also pay attention to not to fall in the trap of being a low-cost manufacturing economy in the long-term like China did in the past. China is shifting to higher value added segments, so Vietnam should act fast to take the same move,” Alex added.

Vietnam cannot compete with China in terms of low-cost manufacturing, but China can become an important export market for Vietnam, Ken said.

Vietnam should know what it is good at and focusing on it, especially segments with high value added like investing high-tech agriculture, and what sectors had driven China and other parts in Asia so that Vietnam can learn how to adapt and develop in the new environment.

“But since Vietnam, a unique country, has a great potential for adaption and, so it should create its own growth path rather than just simply copying any old models,” Ken said.

Investors eye Vietnam as rest of Asia loses sheen

With labor costs soaring in China and Japan and Thailand suffering from natural disasters, Vietnam is likely to see investments flow in from these countries, newswire Dan Tri reported.

Greg Ohan, national head of Industrial & Logistics Services and Global Corporate Services of investment research company CBRE Richard Ellis, speaking at conference held by the American Chamber of Commerce in Vietnam, said: “Pressures from the increased wages and other costs have reduced the competitiveness of the Chinese industrial sector and many international manufacturers establishing plants in China plan to transfer such production facilities to other countries.

“They want to move to a country with more convenient conditions such as labor costs, land prices, and traffic infrastructure, all of which can be found in Vietnam.”

For instance, Canadian textile manufacturer Vintex was eying Vietnam for its US$150-million project while Taiwan’s Foxconn Technology Group also had similar plans, he said.

“Camera manufacturer Olympus also plans to combine its two plants in China into one and build it in Vietnam in a project worth $88 million.”

Other markets had also become volatile, offering opportunities to Vietnam, he said.

One of them was Japan, which was ranked the fourth largest investor in Vietnam and had invested around $21.6 billion in 1,560 projects in the first half of this year, he said.

“The earthquake disaster has forced many manufacturers to consider moving to Vietnam as a safer destination.”

The devastating floods in Thailand were also worrying investors, he said.

With the waters yet to recede, Thailand has shut down seven industrial zones, where the plants of many major manufacturers like Canon, Toshiba, Lenovo, Apple, and Toyota were located.

Consequently, they were eying other Southeast Asian countries, Ohan said.

“Vietnam has attracted the attention of many auto and motorbike makers including Yamaha, Piaggio, and Honda.”

Other speakers at the conference also said the Vietnamese industrial sector was expecting a breakthrough with its many new policies to attract investors, improved infrastructure, and 177 industrial zones available countrywide.

The large workforce, reasonable wages, and stable polity also helped make Vietnam a more appealing destination, they said.

Super Star Aquarius docks at Chan May port

The Super Star Aquarius cruise ship, bringing 2,100 foreign tourists, from Hong Kong, China docked at Chan May port in the central province of Thua Thien-Hue on November 14.

While in Hue, visitors visited Ancient Hue relics complex and enjoyed Hue Royal Court Music.

This was the first time they had taken a long tour of Vietnam from Ha Long Bay in the northern province of Quang Ninh to the central city of Da Nang.

Thua Thien-Hue expects to welcome over 50,000 foreign arrivals by sea from November, 2011 to March, 2012.

Some 35 cruise ships will dock at Chan May port, including 25 Super Star ships, each with 1,500-1,800 passengers on board.

Since early this year, Chan May port received 43 cruise ships, a two-fold increase over last year.

Thua Thien-Hue draws 43 tourism projects

The central province of Thua Thien–Hue has so far attracted 43 projects in tourism with total investment of more than VND50 trillion.

The local authorities said these projects are focused on upgrading tourism infrastructure and improving tourism services and products in the former imperial city of Hue, which was recognised by the United Nations Educational, Scientific and Cultural Organisation (UNESCO) as a World Cultural Heritage Site in 1993.

The central coastal province plans to receive 2.5-3 million visitors by 2015, earning more than VND3 trillion and contributing to 47-48 percent of its gross domestic product.

Fruit and vegetable exports tipped to rise ‘significantly'

Fruit and vegetable export turnover is estimated to increase significantly during the last months of the year due to global natural disasters, according to the Ministry of Industry and Trade (MoIT).

The MoIT said that many countries in Asia and the EU have been adversely affected by bad weather conditions, both vegetable and fruit yields plummeting against climbing demand.

In agreement, an anonymous Vietnam Vegetable and Fruit Association official said that floods have greatly influenced yields in Thailand .

The unbalance between supply and demand has pushed prices up to such an extent that many countries have been forced to increase their imports, offering Vietnamese exporters an excellent opportunity to thrive, the ministry said.

The ministry additionally predicted that, until the end of the year, exports to the US and EU would remain stable and unaffected by global recession.

Currently, American taste has shifted towards tropical vegetables and fruit, the ministry explained.

Sharing the idea, an association official said, "Tropical vegetables and fruit such as dragon fruit, coconuts and pipe-apples have been favoured around the world."

Moreover, he added that, thanks to Government support, the quality of Vietnamese products has improved considerably.

"The Government has supported farmers in applying new technologies for purposes of developing more competitive products," he said.

"Export revenues have increased month by month. In the first 10 months of the year, vegetable and fruit exports brought in $515 million, an increase of 40.6 per cent over the same period last year," he added.

The official affirmed that this was the first time that the Vietnamese vegetable and fruit industry had managed to reach such record exports..

Vietnam, India step up bilateral trade to boost business investments

Vietnamese Ministry of Industry and Trade, the Chamber of Commerce and Industry along with the Indian Embassy in Vietnam, hosted a seminar “India Calling 2011” to boost business investments in both the countries.
 
50 Indian entrepreneurs from 30 companies in the field of finance, energy, education, construction, high-technology, machinery, medical care and industrial equipment attended the seminar in order to seek lucrative opportunities.

Governments of both the two countries have stepped up bilateral trade to boost business investments.

Bilateral trade turnover reached more than $2.75 billion in 2010, an increase of nearly 35 per cent than in the same period in 2009.

Two-way trade turnover was estimated at approximately US$3.6 billion for the first nine months of 2011, up by over 33 per cent against the same period last year.

The two countries had set a trade turnover target of $5 billion by 2015 and later decided to increase it to $7 billion as bilateral ties strengthened.

With India’s rapid growing economy, businesses are exploring investment opportunities globally. Indian enterprises either prefer to form joint ventures or purchase outright available companies in Vietnam.

For instance, Fortis Healthcare now owns 65 per cent of Hoan My Corporation; Marico bought out 85 per cent of shares of ICP Vietnam to produce home care items, personal care products, cosmetics and food commodities in Vietnam.

Consumer-driven firms enjoying record growth

Vietnam’s consumer-driven companies are having excellent 2011 despite a dark economy.
“With a booming population, rising educational levels and the upward trend of income growth expected to continue, Vietnam’s consumer market should continue to flourish,” said B. Alexander Frank, an investment consultant in Hanoi.

Vietnam was a consumer market full of opportunity, but understanding the market and local partners was critical to consumer success, said Richard Burrage, managing director of market research company Cimigo.

AA Corporation, an interior decorator, said it was expecting to achieve net profit growth greater than 100 per cent this year, while leading hotpot restaurant-chain operator Golden Gate and laptop distributor Digiworld delivered net profit growth of 99 and 71 per cent in the third quarter of 2011.

Asia Chemical Corporation, a chemical distribution company in southern Vietnam, achieved net profit growth of 54 per cent and Traphaco, a pharmaceutical company in the north, achieved net profit growth of 36 per cent at ending of September 2011. MobileWorld, which is typically among the fastest growing companies in the industry, has already more than doubled its stores from 80 in 2010 to 168 currently.

The strong growth of these consumer driven companies is a surprise as 2011 was seen as a tough year for enterprises in Vietnam, with tight credit lines and high interest rates. Chris Freund, managing partner of Vietnam-focused private equity firm Mekong Capital, said that the main factor of these companies doing well was strong leadership and management.

“MobileWorld has a very strong and robust management team and a powerful corporate culture, which enable it to open around 10 stores per month, which is faster than any retailer in the history of Vietnam,” Freund told VIR.

For Golden Gate, Freund added that the company had built its management team into the most well managed restaurant operators in Vietnam. It recently launched restaurant concept SumoBBQ, which is a huge success. Chemical distributor An Giang Plant Protection, is also going places.

“Mekong Capital is very excited about the future of this company,” said Freund, adding that thanks to strong growth of these consumer-driven companies this year, the third quarter of 2011 was successful for Mekong Capital.

Mekong Capital was also making reasonable progress towards exits of remaining companies of Mekong Enterprise Fund (MEF) as the fund’s timeline ends. MEF II’s investee companies performed well in terms of net profit in 2011, achieving weighted average net profit growth of 51 per cent, according to Mekong Capital statistics.

While Vietnam Azalea Fund’s (VAF) non-real estate companies performed well with net profit growth rates averaging around 31 per cent, VAF’s performance was dragged down by two real estate companies, Nam Long and Intresco.

Freund said: “While Nam Long and Intresco were well managed and had low debt levels, they are negatively impacted by the difficulties in raising capital and the high interest rates in Vietnam at the present time. But we are confident that both companies will survive ultimately be successful when the market recovers.”

“I think the situation is most risky for real estate companies that have high amounts of leverage and must pay high interest rates on those loans, the amount of interest expenses for some companies is unsustainable,” he said.

Despite a challenging environment, Mekong Capital expected its investee companies would continue to perform well in the fourth quarter. MobileWorld and Vietnam Australia International School are turning heads.

BIDV’s VND5 trillion credit for Ficombank

Bank for Investment and Development of Vietnam (BIDV) pledged to provide credit of up to VND5 trillion for First Commercial Bank (Ficombank) after signing a bilateral cooperation agreement in HCMC on Saturday.

The credit will be reviewed and revised from time to time following BIDV’s regulations and financial capability.

Under the agreement, which aims to help raise competitiveness of both sides in the development and integration process, the two lenders will also assist each other in a wide range of sectors such as currency trading, payment and banking services, financing, retail banking and non-life insurance. They will cooperate in information exchange and training as well.

BIDV deputy general director Tran Luc Lang said the cooperation agreement would help the two lenders implement the central bank’s currency policies effectively, ensuring the target of financial and banking market development and stabilization.
 
Metro launches solution for customers

Metro Cash & Carry Vietnam late last week launched a new business solution called “A perfect office solution” for professional customers with less than 50 computer users.
Metro provides full service packages of office stationery and information technology (IT) devices at incentive prices.

Top brands in office IT such as Intel, Microsoft, Dell and HP are the major partners of the Metro office Solution, according to the company.

The Metro office solution also targets single users, and small and medium enterprises.

The solution is initially available at three Metro centers in HCMC including Metro An Phu, Metro Hiep Phu and Metro Binh Phu this month and will be further rolled out to all 15 Metro wholesale centers nationwide.

Metro said professional customers wanted to find a complete solution for their office IT and stationery needs under one roof for time and cost efficiency.

Credit, money supplies increase steadily
 
Credit grew by about 8.61 per cent in the first 10 months of the year, while the nation's money supply has grown by a rate of 7.5 per cent since the end of last year, the State Bank of Viet Nam announced in a monthly report.

Outstanding loans in both Vietnamese dong and foreign currencies throughout the banking system remained relatively stable in October, rising just 0.05 per cent over September's level. Cash in circulation was estimated to rise 1.09 per cent over the previous month and 0.9 per cent over the same period last year.

Credit growth so far this year has fallen well under the target of 18 per cent for the entire year and has represented the lowest rate credit growth in over a decade due to the Government's tightened monetary policies.

The State Bank report, however, did not reveal updated bad debt figures for the commercial banking system, which have become of increasing public concern. By late August, bad debts had totalled over VND76 trillion (US$3.62 billion) and had risen by a 0.7 per cent rate over July. Total bad debts have also rose from 2.53 percent in August 2010 to 3.21 per cent in August 2011.

In an attempt to secure the system and to make operations more transparent, the State Bank issued Circular No 35 establishing five core indicators for commercial banks pursuant to International Monetary Fund standards, including the non-performing loan ratio (NPL), capital adequacy ratio (CAR), sectoral distribution of loans ratio, return on assets (ROA) and return on equity (ROE).

Performance of banks under these indicators will be announced monthly, quarterly, semiannually, or annually, depending on each indicator.

"We affirm that all statistics regarding the banking system as well as the bad debt ratio are definitely correctly and are trustworthy," said Dao Minh Tu, head of the central bank's secretariat.

At last month's National Assembly Meeting, Prime Minister Nguyen Tan Dung targeted a 12 per cent credit growth rate for the year and a 12.5 per cent growth in the money supply.

Licence plate fees may rise 500% to deter car buying

The Ha Noi Taxation Department has proposed a fee increase on licence plates for personal cars with fewer than 10 seats to VND10 million ($480), a five-fold increase from the current level.

The fee to get licence plates for motorbikes could be up to VND4 million ($190), according to the proposal as well.

Director of the department, Phi Van Tuan, said that they were finishing the proposal for increasing relevant fees in the purchase of new vehicles and would present it at the next meeting of the municipal People's Council scheduled in early December.

He said this move aimed to limit the purchase of new personal vehicles, which along with other measures was expected to help ease the chronic traffic jam in the city.

The parking fees were also suggested to rise. The daily parking rates for motorbikes would increase by VND2,000. Regarding cars, people who parked at the four central districts of Hoan Kiem, Ba Dinh, Hai Ba Trung and Dong Da would face the greatest increase as the monthly parking charge could go up by 450,000 ($21). Chairman of the municipal People's Committee Nguyen The Thao said that there was no tool that was more effective than economic instruments and believed that the proposal would receive the public support. Before Ha Noi, HCM City was the first to propose a significant increase in the auto registration fees, to VND20 million ($960) and has been implementing it at the pilot level.

In the recent development, the Ministry of Finance has agreed with the Ministry of Industry and Trade to increase the registration fee (another type of fee which is different from the licence plate fee) by 20 per cent, replacing the current level of 10 to 12 per cent. As of now, the number of cars in Ha Noi is estimated to peg at 380,000 – and the total number of motorbikes up to about 3.3 million.

S Korea funds town water supply project

More than 80,000 residents of Buon Ho Town in the Central Highlands province of Dak Lak will benefit from a water supply construction project granted by the Government of South Korea through the Korea International Co-operation Agency in Viet Nam.

The US$44.5million project was launched yesterday with an aim to provide a

stable water source for the area where 70 per cent of local people use

unsafe water from wells, rivers or lakes for living.

"Safe water is the foundation for economic development. I hope that the project will contribute to socio-economic development and minimise the impact of climate change for the local people," said the vice president of KOICA, Han Choong Sik.

Mekong Delta growth increase planned
 
The State Bank of Viet Nam (SBV) plans to create new, more open credit mechanisms that will inject more money into the Cuu Long (Mekong) Delta to address its infrastructural shortcomings and contribute to its poverty alleviation efforts.

SBV Governor Nguyen Van Binh said at a recent press conference that agriculture and rural development, particularly food and fisheries sectors in the Mekong region had achieved several impressive results in recent years.

This could be seen in the past when the delta only ensured supplies of rice and fisheries products for consumption on the spot, but now it has developed into a large-scale commercial commodity production area capable of ensuring sufficient supplies for both domestic and overseas markets, Binh said.

However, infrastructure in the delta was very poor and local people still had very low living standards, he said.

Binh said the delta, has, for many years now, received financial support from a few credit institutions, mainly the Agriculture and Rural Development Joint stock Commercial Bank (Agribank) and the Bank for Investment and Development of Viet Nam (BIDV).

However, this has not been enough; and to enable the region to upgrade its local infrastructure systems, the central bank would co-operate with the Ministry of Agriculture and Rural Development, the Southwestern Regional Steering Committee and local authorities to establish new credit mechanisms that would be more open and flexible, he said. The current credit activities and services in the region will be kept unchanged, but the central bank will ask commercial banks to provide new loans for key projects such as construction of rice silos and frozen storage facilities, production of export-oriented rice, and enhancement of seafood processing capacity.

These infrastructure facilities would help add value to the delta's export-oriented agricultural and fisheries products, and reduce speculative practices so as to generate more profits for farmers.

Major banks, in fact, have already been asked to step up the disbursement of capital for rural and agricultural development projects, particularly in the Cuu Long (Mekong) Delta region, Binh said.

Next year, Agribank, while retaining its main role in providing credit for rural and agricultural projects, will increase credit for these sectors from the current 60 per cent to 80 per cent of its lending.

The central bank would also require other banks to set aside 20 per cent of their total loans to rural and agricultural projects, he said.

Those that were not able to directly grant loans for rural and agricultural projects in provinces would have to transfer capital equivalent to 20 per cent of their total loans to Agribank, he added.

The central bank governor said that in the last 10 months, the entire banking sector's credit growth had not yet reached 10 per cent, but credit growth in rural and agricultural areas had climbed to 32 per cent, making it possible for localities to create more commodities and generate employment.

Motorbikes costly despite surplus
 
Vietnamese consumers continue to face high sticker prices for motorbikes despite an abundant supply and tax benefits for businesses that offer domestically manufactured units.

Figures from the Ministry of Planning and Investment's General Statistics Office showed that in the first 10 months of this year, the country produced 3.37 million motorbikes, representing a 20 per cent increase over the same period last year.

Last month alone, nearly 399,000 motorbikes were produced domestically, a 26 per cent year-on-year increase.

However, purchases of new motorbikes fell by 18 per cent so far this year, boosting inventory in the 10-month period to 50 per cent over the same period last year.

At the same time, several motorbike manufacturers have expanded production and increased productivity despite low market demand.

Honda Viet Nam, which occupies 60 per cent of the market share, has invested US$70 million in two factories in northern Vinh Phuc Province to increase productivity from 1.5 to 2 million units per year and announced plans to build a third factory in Dong Van 2 Industrial Park in northern Ha Nam Province.

The $120 million factory is expected to bring the company's total yearly capacity to 2.5 million.

Japanese Yamaha Company also decided to invest more than $30 million to expand its factory in Viet Nam, increasing its productivity to 1.5 million units per year, while Italian Piaggio Viet Nam Company expanded its factory in April to increase production by 300,000 motorbikes annually.

The Ministry of Industry and Trade estimated that by the end of next year, the country's total yearly capacity for motorbike production would be five million units, resulting in a saturated market in upcoming years.

The rate of motorbike production in the country has increased rapidly, by 50 per cent or even as much as 80 per cent as is the case for some Honda brands.

However, none of the motorbike producers announced price reductions even though supply is higher than demand and they have enjoyed high profits as a result of tax benefits.

The Finance ministry stipulated that businesses with a stock made up of 60 to 70 per cent domestically produced motorbikes would only be required to pay a 10 per cent tax on imported spare parts. In turn, enterprises with only 20 per cent of their stock coming from domestic producers would have to pay a 60 per cent import tax for spare parts.

These savings have not been passed on to consumers, whose only option is to purchase high priced motorbikes.