Stocks soar on positive sentiment

The VN-Index hit an 11-month high yesterday at 472.87 points, an increase of 1.55 per cent over Tuesday's close, as investors increased buying on growing optimism over a coming uptrend.

Many analysts believe the market remains in the uptrend in the medium and long term, while declining sessions will offer good opportunities to pick up shares at bargain prices.

On the HCM City Stock Exchange yesterday, the trading volume was unchanged compared to Tuesday, totalling 88 million shares, worth nearly VND1.3 trillion (US$61.8 million).

Twenty-six of the 30 leading shares by market value and liquidity rallied, pushing the VN30 Index up 1.48 per cent to 542.78 points.

Shares of minerals and real estate companies were traded at the ceiling for most of the trading session thanks to high dividend rates paid on minerals shares and positive prospects for the real estate after the Government's loosening of credit for the sector.

On the Ha Noi Stock Exchange, the HNX-Index gained another 1.25 per cent to finish yesterday's session at 79.55.

The market volume increased 27 per cent over the previous session, reaching 85 million shares worth VND847 billion ($40.3 million), up 16 per cent over Tuesday's total value.

Habubank (HBB) continued to be the most active stock nationwide with 11.1 million shares changing hands, climbing 2.94 per cent to settle at VND7,000. The Ha Noi-based lender yesterday proposed a plan on merging with the Sai Gon-Ha Noi Bank (SHB), following which one HBB share can swap 0.75 per cent of a SHB share. It expects to create a stronger bank after the merger.

Pham Tien Dung, an analyst at Bao Viet Securities Co, attributed the increase of the indices yesterday to "limitations on supply". He said some blue chips had approached the recent peak which was set one week ago, likely leading to the selling pressure at high prices.

Vietnam’s exports to Mexico surge in two months

Vietnam’s exports to Mexico in February hit roughly US$101 million, up nearly 56 percent over last year’s same month, according to the Commercial Office of the Vietnamese Embassy in Mexico.

This was the first time Vietnam’s monthly exports to the second largest Latin American economy surpassed US$100 million.

In the first two months, Vietnam’s exports to Mexico reached more than US$198 million, up 48 percent compared to the same period last year. Its key items included footwear, garment and textiles, seafood, computers, electronics and components, coffee and rubber.

In February alone, Vietnam imported from the Latin American country cattle feed, materials, computers, electronics and components, mechanics, equipment, iron and steel worth US$5 million, up nearly 32 percent against last year’s same month.

Rice exports keep rising

Vietnam has signed contracts to export more than 4.2 million tonnes of rice so far this year, up 24 percent compared to the same period last year.

The Ministry of Agriculture and Rural Development (MARD) reported that in March alone, the country signed contracts to ship abroad more than 1.8 million tonnes, a record high within a month, up 278 percent against February and nearly 68 percent against March 2011.

Traditional importers of Vietnamese rice, including Africa, the Philippines, Malaysia and Indonesia, are once again interested in buying the country’s rice. China, the world’s most populous country, has also signed deals to import 770,000 tonnes from Vietnam.

These positive signs are attributed to the shrinking stockpiles of rice in many countries, an increasing demand and late deliveries by some other major rice exporters such as India and Pakistan.

The Vietnam Food Association said that as of March 31, Vietnam had exported over 1.08 million tonnes of rice valued at more than US$530 million.

Currently, the price of 5 percent broken rice ranges from VND8,550-8,650 per kilo, 15 percent broken rice sells for VND8,050-8,150 per kilo and 25 percent broken rice is priced at VND7,450-7,550 per kilo.

Manufacturers cornered by supermarkets

Many manufacturers have no choice but to agree to provide high commissions and a number of fees to supermarkets in order for their products to find their place on the latter’s shelves.

Businesses also have to suffer long-delayed liabilities from the retailers, which they said have deliberately cornered them, forcing them to produce private label products for the supermarkets.

Recently, Metro Cash & Carry has informed some suppliers of a new schedule for price adjustments. Specifically, suppliers are required to announce new pricing schemes to the supermarkets 30 days in advance, and the adjusted prices can only become applicable 90 days after the supermarkets approve them.

“This means manufacturers have to wait at least 120 days to sell their products at new prices,” lamented T, director of a food processor.

If suppliers disagree with the new regulation they have to take their products off the shelves, or switch to producing private label for the supermarkets, members of the Domestic Club under the Vietnam Association of Seafood Exporters and Processors (ASEP) said.

And this is only the last straw, as manufacturers have accepted many requirements to keep their products on shelves, they said.

“Firms must have strong financial muscles as liabilities at supermarkets usually last at least 30 – 45 days,” said a food processor.

This is not to mention a number of different fees, and the steadily increasing commissions, he added.

“While commission last year was 10 percent, it is 20 – 25 percent this year,” he said.

“Retailers also reap a whopping profit of VND50-60 million from every leased shelf.”

“What matters here is that all of the expenses will be taken into account in the retailing prices,” director of a cosmetic company said.

“We earn almost no profit from selling the products via supermarkets, but we have to anyway since having your products on shelves at supermarkets is a form of quality assurance to customers,” said Thai Quoc Huy, director of Thao Huong Co.

Small- and medium-sized enterprises which have yet to develop adequate distribution chains of their own are those facing the toughest problems with supermarkets, insiders said.

Another problem is that there are currently many manufacturers, while reliable supermarkets are too few, said Chau, director of HancoFood.

“Manufacturers have to heavily rely on the major supermarkets to have outlets for their products,” added Chau.

H, deputy CEO of a food processing company, said that it is difficult for businesses to accept the 120-day waiting period to adjust their prices at Metro.

Most supermarkets usually require that manufacturers wait 30 days to adjust prices, she said, adding that the time at some retailers can be as short as 10 days.

“The inconsistent timing amongst supermarkets will drive consumers to those whose prices have yet to be hiked,” she said.

“Moreover, if businesses agree to make private label products, they will not have to pay certain fees or commissions.

“In other words, supermarkets want to force firms to make private labels for them.”

“However, outsourcing private label products means businesses agree to push their own goods off the shelves,” said Luong Van Vinh, director of My Hao Co.

“You have to see your market share reduced, and your brand slightly affected, but you have no choice” said Truong Chi Thien, director of Vinh Thanh Dat Co, which is outsourcing private labels for a supermarket.

Formosa Steel lifts investment to $22b in cast iron refinery

Taiwan-invested Hung Nghiep Formosa Ha Tinh Steel Co has increase its investment in its cast iron refinery in the central province of Ha Tinh to US$22 billion. When completed, the project will be the first facility of its kind in the nation.

In its status report on the project to the Viet Nam Steel Association, the company said the total cost both stages of the project had initially been estimated at $15 billion but the figure had now been hiked to $22 billion.

The investor has reaffirmed its intent to break ground early next year, with the plant to commence operations one year later, the association's vice chairman, Nguyen Tien Nghi, told Sai Gon Times Online.

The refinery has been designed to supply four million tonnes of products per year, making it the largest facility of its kind in the Southeast Asia, Nghi said.

Other subprojects, construction of the Son Duong deepwater seaport, have already gotten underway, he added.

Earlier in 2010, Ha Tinh Province handed over around 3,300ha of land in Ky Anh District for the investor to develop the complex with an annual output of 7.5 million tonnes. Slow site clearance has reportedly had a significant impact on purchasing contracts for equipment from European suppliers.

Local authorities expected that the complex would create 10,000 local jobs in the first phase, with the figure to grow to 30,000 upon completion of the second phase.

Ha Tinh People's Committee chairman Nguyen Kim Cu said that the project could help shift the provincial economic structure from agriculture to industry and services, fostering the development of other industries not only in the province but also neighboring localities such as Quang Binh and Nghe An.  

Fishers leave vessels ashore as fuel prices rise

Following last week’s fuel price hike, the second in less than two months, many fishermen have left their vessels unused to avoid losses.

Some have even planned to sell their boats as the diesel oil priced rose by 500 dong per liter on April 20.

“With every month-long sailing trip consuming 24,000 – 25,000 liters of diesel, expenses have overrun by VND12.5 million (US$600),” laments Truong Thi Kim Loan, who runs a fishing boat in Vung Tau.

She adds that other expenses including ice, food, fishing nets, and labor costs will also soar, while productivity has slumped.

Hundreds of vessels have been docked due to the huge losses of VND100-150 million the fishermen have suffered from each of them, according to other local fishermen.

“Expenses for each fishing trip have risen by VND100 million compared to last year, but productivity is lower, and no fisherman is able to avoid losses,” says fisherman Tran Van Be.

Be thus had to sell a pair of vessel to cut losses, he adds.

Meanwhile in the central waters, many fishers say they are unhappy about the recent bumper fish harvest, as the rising fuel cost has reduced their profits.

Fishermen will return from their trips with a loss if they fail to catch an adequate amount of fish, they say.

“Even those with the largest haul can only manage to break even,” says fisherman Huynh Quang Thien.

“You may have to sell your vessels should you suffer three losing fishing trips in a row,” he laments.

The Ministry of Industry and Trade has recently called on the government to revise Decree no 84 on fuel trading management, as the fuel sector is suffering steep losses.

There has been public concern recently over the ministry’s management of the fuel price stabilization fund. The ministry has been criticized for not depositing money in the fund for banks to earn interest, instead leaving the money at fuel businesses.

However, in the document submitted to the government, the ministry totally ignores this public concern, instead confirming that the fund has greatly contributed to stabilizing domestic fuel prices amid the global economic turbulence.

The ministry also says that as domestic fuel prices have been increased later than their global counterparts, local fuel wholesalers have had to incur huge accumulating losses.

It adds that the price stabilization fund has an accumulated loss from fuel trading activities worth as much as VND5 trillion, which remains unsettled.

“[Fuel wholesalers] thus have to reduce commissions for general dealers and retailers, creating disorder and an instable fuel distribution system,” the ministry states.

Economists claim petrol price hike will not affect inflation
 
An economist says that the recent petrol price hike is unlikely to affect the Government's target on curbing inflation to less than 10%.

Deputy Director of Central Institute for Economic Management Dr. Vo Tri Thanh made the claim at a workshop on Vietnam’s economic prospects held on April 21.

According to Thanh the a sharp decrease in domestic demand combined with the petrol price hike of VND1,000 per litre, together with decreasing interest rates and increased salaries this May won’t threaten the Government’s target.

However, decreasing interest rates would loosen monetary policy, which may lead to increased inflation. Domestic demand remains at a standstill now, and according to economic research, these changes in the economy won’t put the target of curbing inflation at risk.

Thanh affirmed, “According to our research, if petrol price rose 10%, and electricity is put up by 5%, and if domestic demand remains the same, inflation rate will rise from 2.3-2.5%. However, domestic demand is decreasing, so inflation rate won’t increase by such a high rate.”

Inflation is projected to reach 7-8% this year, leaving a 2-3% margin to deal with any sudden changes in the economy.

Monetary policies this year have been loosened compared to last year. Last year, credit growth reached 12%, while it has been expected to increase to 15-17% this year. The International Monetary Fund forecasted that Vietnamese was unlikely to see credit growth from 14-16% due to the fact that enterprises don’t want to borrow capital, or they cannot meet the banks’ requirement.

Therefore, to achieve such an optimistic rate of credit growth, enterprises and banks should sit together and co-operate by providing explicit information, classifying loans, guaranteeing credit, and restructuring enterprise debts.

In terms of the deposit rate ceiling, Thanh said, “There are three main opinions: The first is to abolish the deposit rate ceiling gradually, the sooner the better. The second is to abolish it after the State Bank has dealt with the nine unprofitable banks this May. The third is similar to the second, but after having dealt with those banks, we still apply a deposit rate ceiling of 15% for the next six months then abolish it completely after that. Enterprises can recover over six months, and State Bank of Vietnam can continue to deal with other loss-making banks. The third opinion can be applied to productive businesses, not real estate businesses, so I think it should be considered.”

Former Minister of Trade and member in PM’s advisory board, Truong Dinh Tuyen said he didn’t agree with some opinions that if the deposit rate ceiling was decreased to 12%, then after six months, the loan interest could be reduced. In fact, it wouldn’t be that long.

He continued, saying that a policy should be judged by the time taken to achieve the main final target, not intermediate stages. Reducing interest rates fosters economic growth, and this would take from 5-6 months. In terms of interest rates, that should be resolved in a month, not 5-6 months.

Tuyen also urged banks to reduce lending rates more quickly because credit packages they are offering were unable to meet the demands of the domestic economy.

Tuyen assessed, “If we want to decrease the deposit rate ceiling, liquidity has to be improved, and CPI need to be reduced further. CPI has been reduced, liquidity has also been improved, but not very well. Some large banks have redundant capital, but they cannot offer loans while many loss-making banks are suffering from a lack of capital and bad debts. We should deal with these bad debts to help capital circulate and maintain good liquidity in the economy in general and in banks in particular. There are enterprises in need of capital, but they cannot borrow from banks, or some enterprises can meet those requirements, but they don’t have a potential market to enlarge their business. We should pay attention to them. That will help reduce the interest rate ceiling.”

This year’s credit growth has been set at different levels among banks depending on their own financial situation.

Tuyen said this method hadn’t been used by any countries in the world, but it suited  Vietnamese conditions.

“However, the policy is being carried out ineffectively. There is a fact that even loss-making banks which are saddled with bad debts are still classified at level 2.”

Board members, shareholders divided over fate of CSG

The fate of the money-losing cable producer Saigon Cable Corporation (CSG) is left hanging after its shareholders’ annual meeting on Saturday as board members as well as shareholders were deeply at odds over whether to dissolve the company, scale down its chartered capital, or keep its operation status quo.

The meeting lasted over six hours with heated arguments among board members and shareholders regarding the company’s fate. At the end of the meeting, all solutions failed to meet the conditions and legal bases to be passed.

CSG’s management board presented two proposals, which were either to dissolve or to reduce chartered capital from VND300 billion to VND80 billion. However, at the meeting, shareholders asked for other solutions so that the company could continue to operate.

But, according to the vote counts of the meeting, 64.58% of 144 shareholders who hold a 71.77% stake agreed with the dissolution solution. Meanwhile, 8.47% agreed to reduce chartered capital and the rest wanted the company to continue its operation.

Pham Hong Son, CSG’s vice board chairman, at the meeting presented a business strategy which was previously vetoed by board members. Son said he wanted to maintain the company owing to large cash amount of VND235 billion retained from last year and change the strategy by investing in multiple sectors such as gold exploitation and rubber cultivation in Cambodia, instead of only producing electric cables.

Meanwhile, Do Van Trac, representative for the 31% stake in CSG held by Sacom Investment and Development Corporation and board chairman of Sacom, rejected the proposal of continuing the operation. Trac, who also serves as board chairman of CSG, said “it is not easy for CSG to make any profit during the current situation as the management of the board of directors is weak.”

Board chairman Trac and Son at the meeting disagreed on whether to maintain or dissolve CSG. Such internal disagreements encountered the objection of shareholders.

Trac said that if shareholders did not agree with the dissolution, Sacom would take over the whole CSG.

According to general director Pham Ngoc Cau, the most important thing at this time is how the company can preserve its capital, especially when its business operations are affected strongly as telecom firms have now turned to use fiber cables instead of telecom cables.

Information concerning the possible dissolution has also prompted CSG’s customers to cancel their contracts with the company, he added.

CSG last year obtained VND227 billion in revenue and VND10.3 billion in after-tax profit.

Private-sector bankruptcy triggers concern

The policy on tightening credit and reducing aggregate demand under the spirit of Resolution 11 is currently posing a serious challenge to the health of the private sector.

Some 2,400 private enterprises underwent procedures for dissolution in this year’s first quarter, while 11,600 others registered for suspension of operations and tax payments, said the National Assembly (NA) Economic Committee.

As such, the number of troubled businesses forced to dissolve or halt operations has risen 9% over the same period last year. The amount of enterprises that have completed the procedures of disbandment has surged 62.18% year-on-year.

Meanwhile, 17,800 enterprises were newly established in the first three months with the total registered capital of over VND100 trillion, dipping 6% in business volume and 10% in capital against the same period in 2011.

Nguyen Van Giau, chairman of the economic committee, expressed his concern over the Index of Industrial Production (IIP) in the first quarter of 2012, picking up only 4% year-on-year, the lowest level in as many years.

“Such an index sounds an alarm that production capability is going downhill,” he noted.

Furthermore, 18 out of the 32 major industrial items have seen their growth rates slow down, said the committee.

The inventory index of local manufacturing and processing industries has drastically shot up. As of March-end, the index has increased 34.9% over the year-ago period.

Rising input costs and labor expenses, coupled with mounting inventories and high lending rates, have dealt a hard blow to enterprises, Giau noted.

According to the Government’s report submitted to the NA, as of last year’s end, there had been 623,700 enterprises registering for establishment, with 457,000 of them currently active.

The Government admitted 2011 marked the first time the number of fresh businesses declined significantly since the Enterprise Law 1999 took effect.

Dissolved and suspended enterprises totaled over 53,790, rising 24.7% against 2010. Among those, some 7,600 businesses officially dissolved, 15% higher than 2010, and more than 46,300 enterprises registered for business suspension or sought tax relief, a year-on-year increase of 26.6%.

The number of bankrupted enterprises differs from one State agency to the other, however.

According to the Ministry of Planning and Investment, the total number of newly-established enterprises reached nearly 623,000 by the end of last year, versus 544,000 in 2010 and 455,000 in 2009.

However, surveys of the General Statistics Office showed that the amount of actually operating enterprises was much lower than the registered number, at 291,000 in 2010 and 249,000 in 2009. The statistics of 2011 is not available yet.

The General Department of Taxation under the Ministry of Finance recorded that some 413,000 enterprises had fulfilled their tax duties as of 2010-end, a hefty surge of 214% over 2007.

The data of the statistics and tax agencies show that the enterprises that actually exist only make up a half, or two thirds, of the number of registered businesses reported by the planning ministry.

Tran Dinh Thien, director of the Vietnam Institute of Economics, stressed: “Given the current slow progress of interest rate cuts, it is predictable that the number of bankrupted, dissolved and suspended enterprises will continue the uptrend in the coming time.”

On the other hand, the worse concern is that most enterprises are cutting down on operational capacity, scaling down production and laying off workers. “This is actually the undersurface of the iceberg of difficulties that Vietnamese enterprises are coping with.”

Experts discuss ways to break real estate logjam
 
Experts gathered yesterday at a Ha Noi conference to review real estate market investment opportunities and discuss solutions for the stagnant sector.

"Challenges faced by investors and businesses in the real estate market would be an opportunity to purge the market, reduce weak investors and make it more professional," said Vu Tien Loc, chairman of the Viet Nam Chamber of Commerce and Industry (VCCI).

Experts participating in the event agreed that the market had undergone a long slowdown, making businesses and investors in the sector face difficulties.

They said the market had been nearly frozen and reduced to the lowest possible level.

Statistics from the Ministry of Planning and Investment showed that in the first quarter this year, around 2,400 enterprises dissolved while 11,600 ones registered to cease their operation.

Can Van Luc, senior advisor of the BIDV bank's Management Board said more than 350 real estate transaction floors in the first three-months had been quiet despite of some trading in March.

Luc said estate prices in all segments of commerce, housing and tourism continued decreasing.

Sharing the ideas, Phan Thanh Mai, general secretary of the Viet Nam Real Estate Association (VNREA), said estate shares tended to decline strongly due to effects of the market and policies.

"Investors were reserved with share groups as they were worried about financial risks from estate businesses," Mai said, adding that the group would continue to cope with difficulties. Investors therefore should consider to choose good performing shares to avoid losses.

VietRees' survey conducted in eight provinces also showed that the reasons for the "quiet" market were due to extended investment, capital shortage, unstable macroeonomy factors and incomplete legal framework.

Mai added that 70 to 80 per cent of capital for estate projects were bank loans.

"Businesses have been under the pressure of capital costs because of high lending interest rates. Several firms tended to transfer a part or whole projects to others," he said.

In addition, it was a struggle for estate businesses, which had participated in the market for the last three to five years while the market was "hot", to take their investment back.

A survey of Asia Commercial Bank (ACB) said around 30 per cent of businesses could not access loans due to complicated procedures, mortgage shortages and high interest rates, though the Government had loosened credit for the estate market.

John Gallander, director of Savill, said the market needed professional marketing and sales people to attract buyers, while long-term capital would be the most important.

He said the Vietnamese estate businesses often mobilise capital from customers and bank credit. Listed enterprises could raise capital on the stock market while big ones could issue bonds with banks' guarantee.

Nguyen Trong Ninh, deputy head of the Ministry of Construction's Housing and Real Estate Management Department, said the ministry would submit to the Government in the second quarter to allow construction of 25-square-metre apartment.

Ninh said the area would suit the market demand and financial capacity, thus help investors sell their projects.

"The market shortcoming was that its development did not link to the market orientation and lacked planning," he added.

The ministry would work with banks to review estate projects, especially social housing ones which could be completed this year.

It asked banks to limit personal loans investing in the market.

A real estate investment trust fund would also be established to seek mid-and long-term capital with reasonable interest rates for projects.

Former Apple CEO Sculley advises local enterprises

Corporate leaders should create an active and optimistic business culture, but should not expect miracles during tough times, says John Sculley, former president of PepsiCo and former CEO of Apple.

Speaking with local entrepreneurs yesterday in a meeting arranged by the High Quality Vietnamese Products Business Association, he said a good leader placed the company's benefit above his own, recruited the best employees that he could and provided them with the best possible working environment.

Many local business leaders said they had learnt many things from the meeting.

Dr TranThi Le, general director of Nutifood, said: "I learnt from him how to continue being passionate about my business, be patient in coping with the current difficult time and in mapping out plans for future development."

Ly Huy Sang, deputy general director of Minh Long I Company, said: "I agree with him that a good CEO must be a hard-working person, be close on the work so as to solve difficulties in the best way.

"I am also impressed with the dare to fail culture of the US, which allows young people like us to be more confident in starting our businesses."

Leaders are like good athletes, meaning that only few people have inborn talents, but three decisive factors for a successful leader are education, relentless training and learning from experience, Sculley said.

Firms urged to enhance management

Companies should actively enhance management capacity and restructure drastically now at a time they were seeing high risks of losses, debts and bankruptcy, economist Bui Kien Thanh said at a conference in Ha Noi late last week.

Propping up enterprises had become an urgent issue in the face of stagnant production, increasing inventory and falling profits, he said, noting that 79,000 companies went bankrupt last year.

Unsold inventories and overdue debts remained a major problem for firms in tough business conditions, as turnovers have declined and slimmer profits have been inadequate to cover the high costs of financing.

Many companies have also used capital unreasonably, with many firms using short-term capital for long-term investments, he said, citing a seafood firm that failed to pay its debts after taking out a short-term loan of VND1.2 trillion (US$57.7 million) to invest in a beverage plant.

"In doing business, the most important thing is to manage risks and assure security," Thanh said. "Enterprises can hope for development only if they can maintain stability and survive crises. It's a pity that this seems not to be truly appreciated."

Economist Nguyen Tat Thinh said on the Government website chinhphu.vn that it was about time companies made more solid investments and focused more on domestic markets. He suggested they invest in infrastructure in small urban areas, processing industries, agriculture and rural areas, healthcare, and projects for which they could approach international capital sources. He also urged firms to publish financial reports to prove themselves more reliable to capital suppliers.

It was also important to hasten equitisation of State-owned enterprises and put them into an equal competitive environment with other sectors, said Truong Dinh Tuyen, a member of the National Advisory Council for Financial and Monetary Policy.

HCM City hosts printing expo

The 57th exhibition of the New York Type Directors Club (TDC) is taking place at the HCM City Exhibition House.

The exhibition, which is held in different localities worldwide every year, will feature more than 200 winning works of TDC annual competitions.

The winning entries, ranging from printed matter and packaging to logos and movie titles, come from 20 countries around the world, including the US, Germany, Australia, Canada, China, the UK, France, India, Japan, South Korea and the Netherlands.

The event, organised by Richard Moore Associates, a brand communications firm, in cooperation with the Business Study and Assistance Center, FPT Arena Multimedia and the HCM City Exhibition House, will close on Friday.

Quang Ngai sees exports rise 168%

The central province of Quang Ngai has so far this year earned an export turrnover of US$125million or 54 per cent of the province's yearly target and a year-on-year increase of 168 per cent.

Of the export turnover, mechanical engineering products accounted for more than $63 million, starch posted $20.4 million and garment and textiles were up 82 per cent. Products of Dung Quat Oil Refinery brought $17.5 million.

Despite economic difficulty, the provincial import turnover reached $270 million, an increase of 17 per cent over the same period last year. The key imports were crude oil, steel, machines, milk and raw materials for garment and textiles.

Businesses call for lower interest rates
 
The HCM City People's Committee and local enterprises want the Government to ensure that annual interest rates are between 14 and 15 per cent on loans taken out by enterprises involved in production and trading, and that banks' bad debts are settled soon.

These suggestions were part of six major measures that the committee submitted to the Government at a meeting on Monday with Deputy Prime Minister Vu Van Ninh.

The measures are expected to help local enterprises survive and develop in a time of prolonged economic turndown.

The committee has said that the State Bank of Viet Nam should find ways to ensure small – and medium-sized enterprises could get access to bank loans at reasonable rates.

But the bank should also strictly control the implementation of deposit and lending interest rates as well as risk management at commercial banks, the committee recommended.

It suggested that the Government reduce corporate taxes by 30 per cent for SMEs and extend or defer their tax payments in 2012.

It also called for the Government to exempt personal taxes for those whose annual income is VND5 million or less, and exempt value-added taxes for some kinds of essential commodities and services.

Another proposal made by the committee at the event targets abrogation of the current time regulation being applied to enterprises that want to re-register. In addition, limitation of imports of unnecessary commodities and adjustments on import tax regulations were also suggested.

Speaking at the event, the People's Committee vice chairwoman, Nguyen Thi Hong, said the city's number of bad debts was increasing rapidly.

She attributed the city's high bad-debt ratio to difficulties that local enterprises, including real-estate developers, have met in production and trading activities.

One of the biggest obstacles for companies was the high lending interest rate, Hong said, adding that the lowest interest rate in the city was 17.3 per cent per annum for short-term loans, and 18.3 per cent for long-term loans.

Tran Quoc Tuan, vice chairman of the HCM City Fine Arts and Wood Processing Association, said although the lending interest rates had dropped, they still remained fairly high and beyond the payment ability of most enterprises.

In addition to interest rate problems, domestic wood manufacturers had had to cope with continuous increases in the prices of input materials together with fluctuations in export markets including the US and EU, all of which have placed another burden on them, according to Tuan.

Do Phuoc Tong, vice chairman of the HCM City Mechanical Engineering Association, said that several current policies and regulations were still improper, thus affecting domestic enterprises' production and trading efficiency.

Citing the mechanical engineering industry as an example, he said the quality of some kinds of domestic mechanical engineering products were better than the quality of similar products made in China.

For his part, Deputy Prime Minister Vu Van Ninh admitted that current lending interest rates were still high relative to enterprises' current difficulties.

Ninh said he would ask the State Bank of Viet Nam to examine the application of both deposit and lending interest rates at banks to ensure proper interest rates for local enterprises.

He also agreed with the People's Committee's proposal to limit imports of unnecessary commodities by creating technical trade barriers.

Da Nang lures Malaysian investors

The central city of Da Nang has urged businesses from Malaysia to invest more in coming years.

In a meeting yesterday with the Malaysian Ambassador to Viet Nam, Dato' Azmil Zabili, chairman of its People's committee Van Huu Chien stated that Malaysia's 11 enterprises had invested US$96 million in Da Nang so far.

The city with six industrial zones has welcomed 72 projects worth $635 million.

The Malaysian ambassador said that the bilateral trade between Viet Nam and Malaysia, recorded $6 billion last year, would increase to $10 billion in coming years. The city also expects to lure hi-tech investors to the approved 1,010ha Hi-Tech Park in Hoa Vang District.

Baker Kinh Do to take over smaller rival

Shareholders of commercial bakery company Kinh Do (KDC) have approved a plan to merge with HCM City-based Vinabico Confectionery Company.

KDC currently holds a 51.2-per-cent stake in Vinabico, which has a charter capital of VND50 billion (US$2.3 million).

Under the plan, 2.2 Vinabico shares would be exchanged for one KDC share, with KDC issuing over 1.1 million new shares to complete the acquisition. The merger plan would become official if approved by Vinabico shareholders when they meet this Friday.

Following the merger, Vinabico would be restructured as a limited liability company wholly owned by KDC. The merger, according to the deal's consultant Bao Viet Securities Co, would help increase KDC's scale of operation, while improving operational efficiency for Vinabico through its counterpart's branding and network.

KDC chairman Tran Kim Thanh said, "Vinabico has the same growth rate of 30 per cent as our company, so the merger will create mutual kinetic energy."

In additon to KDC, the State Capital Investment Corporation holds an interest of 14.65 per cent in Vinabico, while HCM City Securities Co holds 12.35 per cent. According to audited financial statements, Vinabico posted a profit last year of nearly VND13 billion ($619,000).

Kinh Do aims to increase its charter capital to VND1.67 trillion ($79.5 million) by the end of this year. It also targets a revenue of VND5.5 trillion ($261.9 million) and a gross profit of VND500 billion ($23.8 million), up 30 per cent and 43 per cent from last year's level, respectively.

Lending sags despite high bank liquidity, lower rates

Many banks have recently met with serious obstacles in promoting lending despite abundant liquidity and continuously cutting interest rates on loans.

According to the State Bank of Viet Nam's official data, the banking sector's credit growth from January through March stood at almost minus 2 per cent, even though the liquidity of major banks had improved significantly.

From the end of last year to March 20 this year, the total outstanding loans of the entire banking system dropped 2.13 per cent, according to estimates.

This year, the country has targeted to limit credit growth at 15 and 17 per cent.

Many independent market analysts said that high lending interest rates, banks' concerns about bad debt, banks'strict lending requirements and decreased purchasing power were the main causes.

They said the central bank recently slashed the deposit rate cap further to 12 per cent per annum, expecting lending rates to follow the trend.

This latest rate cut was a much-needed move to trim down banks' funding costs and lending interest rates to boost credit growth.

As a result, lending interest rates have been cut to between 14.5 per cent and 16 per cent per year.

Many commercial banks are offering the lowest rate of 13.5 per cent to enterprises involved in agriculture, rural and export areas.

The interest rates of loans for investments in production and trading activities are between 15 and 20 per cent.

Bank loans injected into non-production sectors stand at 20 and 25 per cent.

However, these lending interest rates are still considered too high by enterprises, which has discouraged borrowers.

In addition, many borrowers, mostly enterprises, are not qualified for bank loans.

Experts said that banks had had to select customers for lending carefully because they were afraid of an increasing number of bad debts.

Banks have been more cautious recently, following the central bank's issuance of Circular No 10/2013/TT-NHNN that aims to limit credit growth for credit institutions that have a bad-debt ratio on total loans at 10 per cent or higher for three consecutive months.

Meanwhile, Ly Xuan Hai, general director of Asia Commercial Bank, said lending interest rates were much lower than they were before.

However, many enterprises did not want to borrow because the market's purchasing power had fallen.

Lending interest rates were not the decisive factor in influencing enterprises' borrowing habits. Thus, banks still could not attract borrowers even after lending interest rates fell significantly, Hai said.

Most enterprises wanted to borrow in order to maintain their operations but not expand their production and trading activities, he added.

Trinh Van Tuan, CEO of Orient Commercial Bank, also admitted that the bank had abundant available capital, but could not promote lending activities.

Ocean Bank's credit growth stood at a minus 2 per cent for the first quarter of the year.

Although enterprises still want to borrow capital from banks, they still are reluctant because of decreased purchasing power and interest rates that are still high, according to Nguyen Thi Ngoc Van, general director of the Dong A Joint Stock Commercial Bank.

To ensure this year's credit growth target, the bank would also focus on providing personal loans, in addition to lending enterprises, Van said.

Because of these difficulties in lending, many banks have shifted their attention to exploiting payment services in hopes of improving their profits.

Since early March, many have promoted payment service activities, such as collection of water, electricity and telephone charges and even import ant export duties.

Eximbank, for example, has a promotion under which it gave bonuses worth VND300,000 (US$14.30) and free services for six months to those who pay their electricity bills at the bank.

Other banks, Techcombank, VIB, HDBank and Maritime Bank, have also offered several kinds of payment services at home and abroad.