Low demand for domestic made clothes 

 

Clothing manufacturers are finding it increasingly difficult to sell ready-made stitched garments in the domestic market due to high fabric costs.

 

Prices of global cotton and yarn have soared continuously, pushing up prices of fabrics by 40-50 percent.

 

Fabric wholesalers at Tan Binh Market said fabrics are not selling much in the local market. The volumes have dropped considerably even though it is nearing the summer peak season.

 

Nguyen Huu Toan, director of Sanding Fashion Company, said the total sales in the company’s 11 shops have reduced by 30 percent.

 

He added that not only have fabric prices climbed by 40-50 percent compared to the same period last year but also the price of thread, buttons and zippers has risen.

 

Mr. Toan said before the last Lunar New Year in February, a meter of cotton fabric cost only VND30,000 but now it sold for VND63,000 whilst a meter of khaki fabric fetched VND50,000 it is now VND90,000.

 

All kinds of fabrics, including those made of cotton and polyester, have seen price hikes.

 

Increasing prices of clothing material have pushed selling prices of clothes up by 30-50 percent, with the price of a shirt increasing to VND300,000 from VND200,000.

 

Not only shoppers but also manufacturers have realized that apparel prices have become too high.

 

Viet Tien Garment Company has seen decreasing sales in the local market too.

 

To minimize stock and avoid losses, clothing manufacturers have had to reduce production.

 

Mr. Toan said his company has had to cut off half of the production quantity. For instance, previously the company usually made about 300-400 pieces for one women’s shirt design in three colors and six sizes, but it presently makes only half that number.

 

Individual apparel makers in Tan Binh District have also been in the same boat. Many of them have had to halt or reduce production.

 

The price hike has inconvenienced local clothing manufacturers, who have to import material since they have to compete with low-priced clothing from China, which has an abundance of textile factories.

 

Rubber second highest agro export product 

 

The Vietnam Rubber Association announced yesterday that the turnover of rubber exports during 2010 were the highest ever, outdoing even coffee to become the second highest export commodity in the country in agricultural products.  

 

Rubber exports crossed over 782,000 tons worth US$2.3 billion. These figures were only exceeded by rice exports.

 

The price on one ton of rubber increased by 82 percent, fetching US$3.053 in the export market.

 

Rubber has now been listed as the top ten export commodities in Vietnam.

 

By 2010, the country had 740,000 hectares of rubber trees, the largest growing area for industrial trees with an annual growth rate of 7.7 percent.

 

Rubber has greatly improved the livelihoods of over 130,000 workers employed by businesses in farms and other 140,000 households who have their own plantations.

 

Vietnamese rubber accounts for 7.3 percent of the total output in the world, ranging fifth after Thailand, Indonesia, Malaysia and India.

 

The average production of Vietnamese rubber is 1,720 kilograms per hectare, which is second to India with 1,784 kilograms per hectare.

 

Major German state highlights Vietnam’s investment climate

 

Both political and business circles from the Baden-Wurttemberg State of Germany has lauded Vietnam as an international investment attraction at a workshop in its Pforzheim city.

 

Addressing the workshop on Vietnam economy, the Pforzheim mayor congratulated Vietnam for its success in economic reforms in the recent past, saying the country has great potential for development.

 

Vietnam is an international investment attraction and a partner of German investors’ interest, emphasised the German official.

 

The Executive Manager of the Economic and Scientific Cooperation organisation of the Baden-Wurttemberg state, Dr. Michael Hagenmeyer, recognised Vietnam ’s legal upgrade in service of economic reforms.

 

Vietnam is ready for its economic reforms scheme through upgrading the legal framework for foreign investment and business operations, especially since the country joined the World Trade Organisation, said the senior economist.

 

He also lauded Vietnam’s economic and investment law as the most opening in the region and its human resources with a majority in the working age and characterised with industriousness and enterprising will as a great advantage.

 

April last year, a delegation of medium and small-sized enterprises from the Baden-Wurttemberge state, the third largest state in Germany, visited Vietnam to conduct market survey and also to launch the next phase of a mini-credit project for poor farmers.

 

The project has been sponsored by the Sparkasse Bank, in association with the TYM Fund run by the Vietnam Women’s Union, to benefit the poor in 175 rural villages since 2005. As a result, 40,000 local poor farmer families with monthly incomes less than 10 Eur have managed to establish small production entities and develop animal husbandry for a better life

 

For his part, Vietnamese Consul General Nguyen Huu Trang called for German enterprises to intensify transfer of technology and economic management skills through investment in Vietnam.

 

Vietnam-US trade turnover increases by nearly 20 pct

 

Two-way trade turnover between Vietnam and the US in the first quarter of this year reached US$4,743.7 million, up 19.6 percent compared to the same period last year.

 

According to the US Department of Commerce, Vietnam’s exports hit US$3,693.5 million, up 18 percent against last year’s first-quarter figure.

 

Garment and textile products continued to top the list with total earnings estimated at US$1,478.3 million, showing a year-on-year increase of 14 percent. They were followed by footwear with US$456.4 million (up 32.3 percent), wood products with US$395.6 million (up 3 percent), electricity equipments with US$194.4 million (up 22.4 percent), and seafood products with US$153.3 million (up 5 percent).

 

Meanwhile, Vietnam’s imports from the US rose 26.3 percent to US$1,050.2 million.

 

Ministry hopes to keep abreast with stats

 

The Planning and Investment Ministry's General Statistics Office (GSO) officially launched a new National Statistical Indicator System (NSIS) in response to emerging global issues yesterday.

 

"The 2005 NSIS exposed various shortcomings in terms of the changing global economy," said GSO's deputy director Nguyen Bich Lam.

 

Lam said that previous system indicators had failed to keep up with industrialisation, modernisation and social security, adding that the new system would make new indicators suitable to current trends.

 

The GSO general director Do Thuc, said that the new system would ensure the independence, objectivity, uniformity and consistency of the statistical indicator system and avoid overlapping amongst relevant agencies.

 

The new system will cover 21 sectors including land, climate, administrative unit population, business and labour. The system will include 350 indicators, 76 of which will be brand new.

 

"Several environmental indicators were added to the system with 24 focused on environmental protection," he said.

 

Other new NSIS indicators include monetary, stock, insurance, real estate, public finance and national accounts.

 

As of this year, 297 indicators will come into practice while the remaining number would be implemented during the 2012-15 period.

 

Ireland shares experience with public debt crisis

 

Irish economic experts spoke about their country's public debt crisis and experiences during the EU/IMF bailout to Vietnamese experts and businesspeople during a seminar yesterday in HCM City.

 

"What happened was not unique to Ireland and merited greater examination from different perspectives, including the perspective of an emerging economy, such as Viet Nam," said Maeve Collins, Irelands' Ambassador to Viet Nam.

 

Speaking at the "Ireland – Southeast Asia Business" seminar in HCM City, she said that it was hard to explain how such a small and relatively prosperous country was in "the Viet Nam News every morning and on CNN every night and how we could suddenly have such a potentially dramatically destabilising effect on the entire Eurozone."

 

Dr. David Duffy from the Irish Economic and Social Research Institute said that important priorities for the country were to restore order to public finances in balance with economic growth, deal with high unemployment levels, restructure the banking system, and drive export growth but also build for strong domestic demand.

 

He said there was a cost to the recession with permanent loss of output, lower potential output growth in the future, and higher emigration.

 

"We had to take severe fiscal action, such as eliminating the deficit, but too slow an adjustment was not an option, and it highlighted the cost of past policy mistakes," he added.

 

The economy can return to growth as the world recovery continues and the export sector responds to world demand and competitiveness. The labour market will become more flexible and competitiveness will be restored.

 

The banking system will finally be sorted out and there will be no more shocks, Duffy said.

 

"Long-term damage is likely to be significant because of lower capital stock and higher debt. However, recovery could see rapid growth but would not restore all losses and the higher cost of capital would have long-term effects," Duffy said.

 

The expert stressed that public finance constraint means domestic policy options are limited, and there was no scope for a fiscal stimulus.

 

"Fiscal policy should address past failures and restore a sustainable path, move towards a stable tax base, and not rely solely on cyclical factors. Government fiscal policy needs to become counter-cyclical," he said.

 

In response, senior Vietnamese economist, Dr. Le Dang Doanh spoke about the lessons learned from the public debt crisis in Europe.

 

"Overly high budget spending leads to high budget deficits, easy borrowing abroad, inefficient public investment, declining tourism and painful measures for workers and the poorest people," he said.

 

Viet Nam has a budget deficit of around 6 per cent of GDP and Government debt that is 53 per cent of GDP.

 

Doanh asked for more reforms from the Government, especially more transparency in the state budget and in small – and medium-sized enterprises.

 

"Anti-corruption measures must be implemented rigorously and efficiently in all public investment projects, land licenses and mineral exploitations," he added.

 

Other urgent tasks include tightening of monetary and fiscal policy, efficiency instead of high growth rate and more attention to the social safety net and health care.

 

Noting the Government's battle against inflation, Dr Le Xuan Nghia, vice chairman of the National Financial Supervisory Commission, outlined what Viet Nam had done.

 

"This year, we will cut public spending by around US$4.5 billion, reduce public investment from 44 per cent to 37 per cent, decrease the rate of money supply less than 13 per cent from last year's 28 per cent, and increase monetary tightening by degrading credit growth only 19 per cent in comparison with 31 per cent last year," Nghia said.

 

In addition, the Government will apply a ceiling interest rate of 14 per cent annum, refinance interest increased from 9 per cent per annum to 14 per cent per annum, control of credit limit, credit for real estate and prices, particularly petrol and food.

 

Nghia also announced that the Government was battling dollarisation until 2013.

 

Inflation eats at people's savings

 

"Where should I invest my savings?"

 

Many people are asking this question now and there are no easy answers.

 

In spite of the Government's strenuous efforts, inflation is showing no sign of coming down.

 

Inflation hit a record high last month, increasing 3.32 per cent over March and 13.9 per cent over April 2010.

 

Meanwhile, deposit interest rates have been capped at 14 per cent while the lending rate has climbed to between 19 and 20 per cent.

 

"At such inflation and interest rates, we cannot get any benefit from depositing our savings with the banks. In other words, depositing the savings can only be considered a safe measure to conserve capital when we are unable to find a way to make profitable investments," said Bui Phuong Hang of HCM City's Tan Binh District.

 

The securities market has continued its gloomy performance with low liquidity.

 

Many listed companies have made losses because they are unable to develop production or reinvest due to a lack of capital. Consequently, the prices of stocks have dropped strongly, and many investors have had to sell stocks to pay debts.

 

The real estate market does not look much better. It is predicted to meet more difficulties as local commercial banks tighten credit to reduce lending to the non-manufacturing sector to 22 per cent of total loans by June and 16 per cent by the year-end as required by the central bank.

 

Market analysts have said that the real estate market is likely to remain stagnant with prices of various kinds of properties standing at their lowest level in recent years.

 

However, these rates are still much higher than the financial capacities of most people in the country with real housing demand.

 

One month ago, investing in the forex market was still considered a profitable undertaking. But now, this business's attraction has reduced significantly since the gap in the exchange rate between the black market and banks has narrowed sharply.

 

The value of the dollar on the world market has also dropped continuously in recent weeks and there are no signs of recovery yet. In fact, the forex rate in the open market has actually dipped lower than the inter-bank market rate.

 

Meanwhile, gold prices have tended to increase despite the State Bank of Viet Nam's decision to stop banks from accepting gold deposits as well as making gold loans.

 

The decision has prompted many commercial banks including Eximbank, ACB and VietA Bank to consider measures to "settle" the gold deposits they have.

 

One method that is being tried widely is to launch promotions encouraging gold depositors to sell the precious metal to the banks.

 

The banks are offering higher than market prices for gold if clients sell the precious metal to them and deposit the cash with them.

 

This also means that individuals who buy and keep gold at home would not make any profit now.

 

For those with considerable financial capacity, the situation still presents opportunities to make profits, experts say.

 

They explain that both securities and real estate markets have bottomed out, so savings invested with banks now can offer significant profit in the future as the economy recovers.

 

Transfer pricing found at both foreign and local businesses

 

Not only foreign-invested enterprises but also local companies in HCMC have been found to have transfer pricing practices to evade taxes.

 

Nguyen Trong Hanh, deputy director of the HCMC Tax Department, acknowledged the illegal activity in a dialogue on Wednesday between the department and the European Chamber of Commerce (EuroCham) in Vietnam.

 

What local enterprises do is to transfer their profits to their subsidiaries in areas where taxes are lower, he said. “Different parts of Vietnam have different tax policies and local companies have taken advantage of this to evade their tax obligations.”

 

Hanh said data from the HCMC Tax Department show 46% of foreign-invested companies and nearly half of local firms in the city reported losses in 2009. However, the department found some mismatches in their tax declarations.

 

“We discovered discrepancies in one-third of the foreign-invested enterprises that posted losses. These were businesses that had seen their turnover rising for 11 consecutive years, from a mere VND136 billion to VND9.6 trillion,” Hanh noted.

 

The Ministry of Planning and Investment this year is implementing a project to increase the capacity of discovering transfer pricing practices.

 

This year, tax agencies are intensifying checks on foreign-invested businesses that have reported losses for years, but have continued to expand their operations.

 

According to the Ministry of Finance, the total tax collection from the foreign-invested companies last year was more than VND1.4 trillion. Meanwhile, official statistics show 80% of companies in the foreign investment sector declared losses.

 

Two more Smartlink banks connect with VNBC network

 

Smartlink Card Services Joint Stock Co (Smartlink) and its members have successfully connected with the Vietnam Bank Card Co (VNBC) network, allowing customers to use the VNBC’s ATM system, the companies have announced.

 

Smartlink’s members include: Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank-STB) and ShinhanVina Bank Ltd (ShinhanVina).

 

This connection will allow Sacombank cardholders, including those with cards with the first Bank Identification Number 970403, PassportPlus debit cards, family domestic credit cards, Sacombank-Vinamilk domestic prepaid card and A Club Card telecommunication debit cards, and ShinhanVina cardholders, to make transactions such as cash withdrawal, balance account checking, and internal bank transfers through the VNBC network ATM system.

 

In return, VNBC cardholders can also make similar transactions at the ATM system of Sacombank and ShinhanVina Bank.

 

Sacombank now has a network of nearly 700 ATM machines nationwide.

 

It has recently launched services at ATMs with machines at its HCMC head offices (266-268 Nam Ky Khoi Nghia, District 3), Tan Binh branch (224 Le Van Sy, Tan Binh District), Binh Thanh branch (270B Bach Dang, Binh Thanh District) and Binh Tay branch (59-61-63-65 Hau Giang, District 6), to assist Sacombank cardholders in transferring cash to any accounts of Sacombank without going to the bank.

 

ShihanVina Joint Venture Bank was established in 1992, under the cooperation of the two banks (Vietnam Commercial Joint Stock Bank for Foreign Trade (Vietcombank-VCB) and Shihan Bank).

 

After nearly 20 years in the Vietnamese market, ShinhanVina currently has four branches, in HCMC, Hanoi, Binh Duong and Dong Nai.

 

ShihanVina is the first bank in Vietnam using the account book system, which helps customers track and manage their spending.

 

Smartlink and VNBC announced in October 2010 that their member banks could perform all transactions successfully at ATMs that have been linked by the two networks.

 

At that time, almost all of the cardholders of more than 20 banks, 22 of which are Smartlink member banks and two are VNBC members, are able to make cash transactions, balance inquiries, account statements and internal bank transfers at more than 5,000 ATMs the two systems with the security and accuracy.

 

Techcombank in deal with Experian to improve banking

 

The Vietnam Technological Commercial Joint Stock Bank (Techcombank) made a deal Wednesday with credit information group, Canadian Experian, in Hanoi to improve the quality of its banking services through streamlining credit management in Vietnam.

 

Experian’s electronic applications will automate Techcombank’s credit management processes to support its strategic development of personal financial services in Vietnam.

 

Techcombank will make use of Experian’s software to establish a sturdy and reliable database so it can build, maintain and enhance long-term relationships with customers, allowing Techcombank to provide better banking services for diverse needs.

 

Experian’s technology will also enable Techcombank to obtain more knowledge about its customers, creating a better support network.

 

"Experian’s applications will provide us with more information for making strategic decisions, optimize banking activities and promoting the development of the retail banking segment,” said Nguyen Duc Vinh, CEO of Techcombank.

 

Experian has successfully deployed more than 1,500 systems that support the analysis and decision making of loan processing, customer management, debt management and fraud prevention worldwide.

 

Experian's systems are being installed in 16 consumer finance offices. The systems hold and maintain information about more than 500 million consumers and 40 million businesses worldwide.

 

Techcombank and Wells Fargo Bank have recently signed a memorandum of understanding to jointly provide banking and financial services for each other’s corporate customers in Vietnam and the U.S.

Products and services will include monetary management, trade finance and funding, serving business activities of enterprises in Vietnam and the U.S.

 

Wells Fargo Bank and Techcombank have been cooperating since 2005.

 

Cooking gas prices out of control

 

Many distributors in Ho Chi Minh City have been increasing the price of cooking gas without permission from their suppliers, a violation of government regulations.

 

In the last few weeks many retailers in Phu Nhuan, Binh Thanh, and Go Vap Districts hiked the price of liquified petroleum gas (LPG) by VND4,000-VND6,000 (20-30 US cents) for a 12-kilogram cylinder.

 

They justified this by saying many companies increased prices in mid-April but refused to sanction a hike in retail prices.

 

“I don’t see any reason for increasing retail prices,” Hoang Anh, deputy chairman of the Southern Gas Sub-association, a member of the Vietnam Gas Association, said, adding that gas import prices have been falling.

 

Le Phuc Dai, general director of Dai Viet Energy Joint Stock Company (Vinagas), said companies reduced commissions for agents due to the increase in costs.

 

Saigon Petro Co Ltd too cut commissions for its agents, many of whom then increased prices. But it not only did not haul them up but also announced an increase in retail prices to legalize their action.

 

But other gas companies have warned their agents about possible penalties for unauthorized price increases.

 

The latest round of hikes is the seventh since February, which have taken the price of a 12-kg canister up from VND303,000 to VND382,000.

 

Some retailers, instead of hiking the price, now ask customers to pay transport costs.

The director of a gas company said companies want to cut commissions for their agents since the latter enjoy high profits but are not strong enough to do it.

 

The director of another company said retailers have a margin of nearly VND40,000 per cylinder.

 

But an analyst said gas companies do not have any leverage with their retailers since they do not know costs at lower levels. As a result, retail prices are controlled by retailers rather than the companies, he said.

 

It is also unclear why different brands cost different prices when they all have the sources of supply, cylinders, and components. For instance a 12-kilogram bottle of SP gas costs VND382,000 while for Saigon Gas it is VND388,000 and for Shell GAS, VND424,000.

 

Risky to borrow from banks for property investments

 

The current real estate environment in Vietnam, though lucrative, is unpredictable and it would be risky to take out high interest bank loans for investment, according to experts.

 

The current market is an opportunity for investors to purchase now at relatively low prices. When inflation is controlled and banks increase money supply by reducing interest rates, prices will surge as the real estate sector becomes busy again, experts said.

 

However, because it is not known how long it will take for the economy to stabilize, borrowing from banks with high interest rates is very risky, according to experts.

 

The real estate market in Vietnam has been remaining silent since the beginning of 2011, with only a few investments made. Many investors have blamed the current situation for tight credit policies major banks are initiating, which restrict the supply of funds to the sector following the government decision to stabilize the economy and curb inflation.

 

Another factor pointed out by experts is the psychology of investors. Many are hesitant to make investments when they see a slow market.

 

The Vietnam real estate market remains a muddled practice where investment properties change hands numerous times, moving from the main investor to secondary investors and eventually to the customer, according to VNExpress.

 

One project was handed over four or five times, going from the main investors to a secondary investor and then to smaller investors. The final customer, who bought the project to live in, had to pay substantially more than the original price, VNExpress reported.

 

The auction process for some real estate developments also lacks transparency, especially state-owned ones such as the Hanoi New Urban project in the capital, said VNExpress.

 

Projects in an expensive area, which can be very prosperous when resold, are commonly sold based on personal relationships between investors.

 

As a result, some secondary investors borrow from banks at remarkably high rates, between 25 to 27 percent, to invest in projects in prosperous areas that the main investor promised to them.

 

This year the government is not offering a stimulus package for the real estate sector, like they did in 2008 and 2009, as it is focusing on macro-stability and inflation control this year and next.

 

Bubbles Pop may happen in the Hanoi real estate market next year:

 

Hanoi now has hundreds of new real estate projects in a city with only 7 to 8 million people. Many experts predict the supply will overpass demand next year.

 

This will result in a sudden and steep fall in price, which could cause heavy losses for the many Vietnamese invested in real estate.