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BUSINESS IN BRIEF 4/12

 Slower growth in manufacturing sector; Strict control on gas prices; Hanoi’s efforts to iron out snags for businesses; An Giang to ship main products to Netherlands; Vietnam’s rice export price surpasses Thailand

Slower growth in manufacturing sector

The Vietnamese manufacturing sector slowed down in November to a fractional pace as a fall in new orders broadly offset continued expansion of output and employment, according to HSBC Vietnam.

There were reports that client demand had weakened which was exacerbated by stormy weather and associated flooding.

The headline seasonally adjusted Purchasing Managers’ Index™ (PMI™) – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – recorded 50.3 during November. That was down from 51.5 in October, although above the crucial 50.0 no-change mark for a third successive month.

Manufacturing output increased for the second month running, with the rate of growth solid and the highest recorded since September 2011. Companies reported that production was raised to help deal with higher volumes of new orders seen during September and October.

On this theme, latest data showed that backlogs of work were cleared to the greatest extent since August. November’s survey indicated that volumes of new orders fell for the first time in three months. The modest reduction followed on from a record increase in October, and was reportedly a reflection of relatively weaker demand.

There was evidence that poor weather which led to some flooding also resulted in reductions in new orders. New export orders were also down in November amid reports of softer foreign demand for Vietnamese manufactured goods.

With production requirements continuing to increase during November, manufacturers again added to their payroll numbers. Growth in November extended the current run of employment expansion to four months, although the latest net increase was again modest.

Manufacturers also raised their purchasing activity, the third successive month that this has been the case.

Growth was again solid as companies sought to service higher current output. Stocks of purchases were also depleted, albeit only marginally.

On the price front, input costs continued to increase during November, reportedly the result of supply-side issues that led to a scarcity of raw materials.

Although solid, the degree to which input costs increased was the slowest seen since July. Moreover, vendors were also keen to improve their performance in the face of stock shortages.

Finally, manufacturers sought to protect margins by raising their own prices. November marked the second month in succession that an increase in output charges has been recorded, although competitive pressures ensured that the degree of inflation was only marginal.

Trinh Nguyen, Asia Economist at HSBC, said that “The slowdown of growth in the manufacturing sector reflects weakness of demand abroad.

The rise of headcount and quantity of purchases suggest that the outlook is rather optimistic. We expect demand from abroad should bounce back after a slump in November, although the pace of growth should still be modest due to lacklustre domestic demand.

With price pressures easing thanks to weaker commodity prices, manufacturers should feel some reprieved.

Strict control on gas prices

The retail price of gas has just increased by VND80,000 (over US$1.5) per 12kg canister to a record high so far this year, causing difficulties for both gas traders and household consumers.

At a press briefing held by the Ministry of Industry and Trade (MoIT) in Hanoi on December 2, Nguyen Viet Chien, Deputy Head of the MoIT’s Domestic Market Department, explained the reason and proposed measures to control gas prices.

Chien said he was concerned about the sharp increase in local gas prices that would lead to the use of other kinds of fuel instead.

Chien asked the MoIT to reduce the tax of imported gas from 5% at present to 0% and strictly manage the gas market to prevent speculation in the face of a surge in the global prices since early this year.

The MoIT should work more closely the Finance Ministry to deal with violations by gas traders, he added.

Chien spoke highly of the Government’s Decree 177 as an effective tool for strict management of gas prices in the country.

He affirmed that there’s no speculation or monopoly on a large scale as major businesses cannot make any corrupt use of their lion’s share to violate the competition law.

Chien revealed that the MoIT already put forth a draft decree to replace Decree 84 on oil and gas trading a few months ago and submitted it to the Prime Minister for consideration on November 14.

Hanoi’s efforts to iron out snags for businesses

In 2014, Hanoi will intensify administrative reform in a bid to alleviate difficulties for businesses.

In 2013, the capital city’s working groups have surveyed nearly 100 enterprises to help them remove difficulties by promoting trade and investment, dealing with large inventories and boosting production and exports.

Hanoi has provided investment loans worth VND7.6 billion and applied tax relief and exemption for businesses totaling VND4,500 billion.

Greater attention has been given to promoting the property market and accelerating the disbursement of support packages for house purchasing. As many as 84.3 billion has been disbursed so far for 21 customers.

Next year, the Hanoi municipal People’s Committee will focus on supervising major business establishments and underway real estate projects with the aiming of pushing up production, diversifying products and improving competitiveness.

The city has also pledged to provide businesses with credit loans at reasonable interest rates, complete the building of industrial parks and industrial clusters and effectively implement programmes to step up industrial production and exports.

An Giang to ship main products to Netherlands

The Mekong delta province of An Giang will export its main products to the Netherlands, under a memorandum of understanding inked on December 2.

According to the document signed with the Netherlands’ Oss city, four enterprises in An Giang province will ship rice, frozen aquaculture, vegetables and rice husk to the Vietnam Trade House in the country for trade promotion activities.

Chairman of the provincial People’s Committee Vuong Binh Thanh said the cooperation between the two sides will pave the way for An Giang’s key products to enter the European market in the time ahead.

Thanh called for assistance from the Netherlands in planting potato on a trial basis in the province.

The province has invested over US$15 million to build a high technology centre so that the Netherlands can transfer its potato growing methods, catering for domestic demand and for future exports, he added.

The MoU is an important step to link up An Giang province’s main products with the Dutch distribution system via Vietnam Trade House, said Bert Van Dijk, Oss Trading Centre Director.

Can Tho facilitates Finnish firms’ operations

Foreign businesses, including those from Finland, will enjoy a number of preferential treatments when they invest in the Mekong delta city of Can Tho.

Profitable investors in the field of services for example, will receive corporate income tax exemption within two years, which will be reduced by 50 percent in the three following years, said Deputy Chairman of the municipal People’s Committee Dao Anh Dung at a recent workshop held in the city.

The locality will also grant tax-free for overseas businesses for certain imported commodities such as equipment, machinery, spare parts, and specialised means of transport, Dung added.

Finland ’s Ambassador to Vietnam Kimmo Lahdevirta noted that two-way trade reached US$192 million in the first ten months of this year. Both countries are working to raise the figure to US$1 billion in the coming time.

Finland mainly exports machinery, equipment and timber products to Vietnam , while importing footwear, interior decorations, garments, IT equipment and office supplies from the Southeast Asian nation.

Vietnam and Finland signed an agreement on investment encouragement and protection in 2008, which is considered an important legal foundation for both sides to increase their trade links.

As of October this year, Finland had eight investment projects in Vietnam with a total registered capital of over US$320 million, becoming Vietnam’s 27th largest foreign investor.

Finland ’s small and medium-sized projects mainly focus on manufacturing industrial glue, garments and timber products, heard participants.

Organised by the Can Tho City People’s Committee and Finland’s Embassy in Vietnam, the December 2 workshop was a good chance for businesses to explore investment opportunities in the city and expand trade ties between the two countries.

Development partnership forum to be held in Hanoi

The Vietnam Development Partnership Forum will be held in Hanoi on December 5 to discuss how to build new partnerships for sustainable, competitive and comprehensive growth in Vietnam.

Speaking at a press conference to announce this information in Hanoi on December 2, Minister of Planning and Investment Bui Quang Vinh said Vietnam has entered the threshold of a low-average income country, while the country’s partnerships with its development partners have been seeing changes suitable for the current situation of aid in the world and Vietnam.

Therefore, the Vietnamese Government and donors agreed to replace the Consultative Group (CG) meeting with the forum, with the participation of all development partners in Vietnam, Vinh added.

Victoria KwaKwa, Country Director of the World Bank (WB) in Vietnam, said the WB wants to share experience to help Vietnam make progress in its socio-economic development, expressing her hope that Vietnam will gain new development strides in the future.

Attendees to the forum will include development partners participating in planning and implementing policies and development cooperation programmes in Vietnam, including representatives from the authorities at all levels, bilateral and multilateral sponsors, social organisations, internal and external non-governmental organisations, the private sector and research agencies.

Minister Bui Quang Vinh said the event will focus discussion on development priorities as well as medium-term challenges in defining and implementing Vietnam’s socio-economic development policies.

Maintaining stability, the restructuring of the economy and growth recovery will be major issues deliberated at the event.

The CG is an annual dialogue on development policies and partnerships with international donors, as well as a forum to outline priorities to mobilise and utilise official development assistance (ODA) funds to Vietnam. It is also a platform for international donors to announce ODA commitments to Vietnam.

Vietnam’s rice export price surpasses Thailand

According to Oryza Global Rice Prices, Vietnam’s 5% broken rice was sold at US$425 per tonne in the world market last week while Thai rice was traded at just US$395 per tonne.

The price was US$15 per tonne higher than last week, up US$30 per tonne compared to last month and down US$5 per tonne against the same period last year.

Meanwhile, Thai rice was traded at US$395 per tonne, down US$155 per tonne against last year’s period.

The sharp price hike in Vietnamese rice is attributed to Vietnamese businesses recently securing contracts to export 500,000 tonnes of rice to the Philippines.

According to the Vietnam Food Association (VFA), the paddy price in the Mekong River Delta ranged from VND5,600-5,700 while long grain rice was sold at VND5,800-5,900 per kilo, VND250 per kilo higher than last week.

Southern Bank reports third quarter profit loss

Southern Bank’s third quarter profits fell sharply on the back of losses sustained by several areas of its operations.

The bank’s financial statement for the third quarter showed pre-tax profit plunging 65 per cent to VND33.9 billion ($1.6 million).

The drop is the result of VND7.5 billion ($0.35 million) losses in forex trading and VND44.2 billion ($2.1 million) in investment securities trading. In the same quarter last year those areas brought the bank profits of VND7.9 billion ($0.37 million) and VND476 billion ($22.6 million), respectively.

The lender’s revenue from services fell by 53 per cent on-year while at the same time operational outlays rose 10 per cent and income from investments in other entities fell 9.5 per cent.

The bank’s profit stayed in the black thanks to net interest income of VND195.8 billion ($9.3 million) in the third quarter, up from the loss of VND178.5 billion ($8.5 million) last year.

Southern Bank saw credit shrink 0.2 per cent in the first three quarters, but at the same time its revenue from lending increased. This is attributed to increased lending interest rates.

Nguyen Xuan Thanh of the Fullbright Economics Teaching Programme expressed concern that the banks have not lowered their lending rates and that the gap between lending and deposit rates still stands at around 5 per cent. “Banks are using this gap to earn income to deal with their non-performing loans,” he said.

In the first three quarters of this year the bank reported pre-tax profits of VND246.3 billion ($11.7 million), falling 12 per cent on-year.

The bank’ bad debt ratio is 3.8 per cent, rising from 2.7 per cent at the beginning of the year.

Labour exports pick up speed

According to the Ministry of Labour, Invalids and Social Affairs’ Overseas Labour Management Department (OLMD), more than 70,000 Vietnamese labourers went to work abroad from January to October, with Taiwan attracting 40,000.

Between October 20 and November 14, the OLMD licensed about 2,000 to work in Taiwan and that figure is expected to rise to 10,000 by early February.

Ninety per cent of labourers went to work in factories, and a small number went as nurses for rest-homes and other medical facilities.

According to the Vietnamese Labour Management Board in Taiwan, one key factor attracting workers to the country was the increase of the basic salary for guest workers to VND13.3 million ($630) per month.

They added that expenses paid by workers for procedures prior to leaving were only around $3,000. Taiwan is increasing its overseas labour recruitments to offset its manpower shortfall.

Top labour exporters are Hutraserco Limited, Cienco 8, Oleco, Halasuco, and Hycolasec.

Deputy general director of Hyoclasec Pham Ngoc Minh said the average income of guest workers in Taiwan range from VND17.5-21 million ($830-$1,000) per month, with workers able to save between $570-$715 per month.

After a period of stagnancy, firms have also started exporting to the Middle East and Africa, particularly Bahrain and Saudi Arabia.

The pay for exported workers at construction sites in Bahrain ranges from VND8-25 million ($380-$1,200) per month, depending on profession.

In Saudi Arabia, guest workers in construction are paid from VND7-27 million ($330-$1,285) per month, based on skills and work requirements.

Qatar has attracted nearly 2,000 Vietnamese guest works this year, mostly in construction, with pay ranging from VND 7-11 million ($330-520) per month.

For the African markets, the OLMD just licensed Hoang Long Limited to recruit 110 truck drivers and construction workers to go to Angola. Employer Avir Company plans to pay them more than $800 per month. Avir will also pay for their air tickets.

After several years of delays, Libya has just opened up with a test programme that sent 200 manual labourers with pay ranging from $300-$1,000 a month.

Ho Chi Minh City eyes $2 bln in year’s FDI

Ho Chi Minh City saw a 30 per cent increase in foreign direct investment (FDI) to $1.6 billion between January and November and expects to reach $2 billion by the end of the year.

Ho Chi Minh City Department of Planning and Investment director Thai Van Re said last week the city expected another $0.4 billion in FDI through the rest of the year.

Speaking at a meeting with city leaders reviewing the first 11 months, he said by November 20 the city had licensed 412 new projects while 120 other projects upped their capital.

The southern hub saw $1.3 billion in FDI last year.

City chairman Le Hoang Quan said that through the rest of the year the city would continue its proactive economic restructuring and shaking-up of state-run enterprises, as well as its balancing of the banking sector and restructuring public investment.

He added that the city had seen 7.6, 8.1, and 10.3 per cent growth in the first, second and third quarters, and expects quarter four to hit 10.7 per cent.

Cut-sized apartments to boost market liquidity

Downscaling apartment sizes has become one of the easiest ways for property developers to shift large inventories of unsold housing stock.

The Hanoi Municipal People’s Committee recently took the decision to allow developers to downscale more than 4,050 units in order to provide cheaper and smaller apartments to feed the lower-income market segment. In order to be downsized, developers have to obtain permission to shift their stock from commercial to social housing projects.

The 4,050 units are spread across 14 commercial housing projects, and once restructured they will provide 5,976 units.

According to the Minister of Construction Trinh Dinh Dung, the high-end market is now hugely over supplied, while there remains massive demand for good value housing.

“Rescaling existing apartments will help developers ease inventories and help liquidity,” Dung said.

During recent years, developers have largely focused on developing high-end apartment projects, with prices reaching VND25 million ($1,200) to VND30 million ($1,430) per square metre for apartments of more than 100 square metres in area. These developers are now redesigning their units into smaller 45 to 70 square metre units as well as scaling back on fixtures and fittings to squeeze into the VND12 million ($570) to 15 million ($715) per square metre price bracket.

Hoa Binh Group’s Hoa Binh Green City saw 200 units (40 per cent of the total housing stock) sold after it downsized the units.

Some other projects are following this trend. Hundreds of units at Golden West were sold in a fortnight following their reconfiguration.

According to Nguyen Thi Dieu Hang, deputy general director of Vinaconex 3, downsizing has proved a reasonable solution, helping developers sell units which has helped them accumulate financial resources to reinvest into other projects.

Meanwhile Vu Cuong Quyet, general director of Dat Xanh North said that developers were struggling to sell larger units in a difficult market. Incoming finances from apartment sales would help projects meet their schedules and ease the pressure on bank loans.

However experts have warned that scaling-down apartment sizes won’t resolve all the problems.

According to Dao Ngoc Nghiem, deputy chairman of the Vietnam Architecture and Zoning Association, attention should be paid to the designs of the scaled down apartments. He said minimum living conditions needed to be ensured, including public space and facilities.

“The redesigned units would create stronger pressure on the local community when population density increased. This issue must be considered by policy makers, developers and buyers in order to map out better transportation infrastructure, and greater power and water supply needs and other relevant issues,” Nghiem said.

Meanwhile Nguyen Van Hai, director of the Hanoi Architecture and Zoning department warned developers to ensure the buildings that were being restructured were capable of coping with the changes and that power and water supply, drainage system and services were all amended to take into account the higher population density.

GSO expert evaluates remittance success

In the latest forecast from the State Bank of Vietnam (SBV), remittances into the country are likely to hit $11 billion this year, rising healthily against $9.75 billion last year. This would bring total remittances for the last 20 years to $84 billion.   

According to the World Bank, Vietnam is ninth in the list of top 10 countries receiving remittances. In the top three were India with $71 billion, China with $60 billion, and the Philippines with $26 billion.

Remittance growth in Vietnam was around 24 per cent a year from 1994-2012, with the exception of 1997 when they fell after regional economic turmoil and again in 2009 after the global recession.

There are four factors behind Vietnam’s remittance success.

Firstly, the vast network of overseas Vietnamese (Viet Kieu) living abroad, nearly four million, and particularly in the US, Australia, Canada, and France which generally represents nearly 80 per cent of the total.

Notably, nearly 1.2 million Viet Kieu return home to visit their families every year with average spending of $1,000 a person.

Besides, over 400,000 Vietnamese labourers work abroad and contribute remittances of around $2 billion a year.

A second factor is Vietnam’s open-door policy and economic integration, along with effective policies governing remittances.

Few countries allow remittances to be received in dollars, rather than being exchanged into the local currency for deposit or sale to banks.

A third is the interest rate for dong deposits is higher than that of dollars, helping to attract foreign currency flows.

One dollar in Vietnam has a purchase price equal that of 2.5 dollars in the US and company shares are regarded as relatively cheap. Vietnam also allows Viet Kieu who live in the country for a certain period of time to buy property.

Fourth is that remittance services are developed and reliable and the number of service providers is rising fast.

Experts differ on benefits of tight currency policy

Experts are weighing the economic effects of keeping the currency stable.

Banking expert Nguyen Dac Hung said the Vietnam dong-US dollar exchange rate has been fairly solid in recent years.

In 2010, the exchange rate shot up 9.68 per cent, in 2012 it slid 0.96 per cent, and this year it has only risen 1.32 per cent and is forecast to peak at around 1.4-1.5 per cent by year end.

The rate will go up by a maximum 2-2.5 per cent for 2014-2015 thanks to the government’s commitment to a stable rate, Hung added.

The State Bank’s (SBV) efforts to keep the rate stable in recent years have been praised by the banking community and import businesses.

According to a source from HSBC, Vietnam has the third most stable currency in Asia, which has hiked foreign investors’ confidence when doing business in the country.

That said, the central bank’s efforts have also seen their fair share of criticism.

Economist Vu Dinh Anh said the stable exchange rate had falsely strengthened Vietnam dong, disadvantaging exporters.

Anh recommended the SBV consider the risk of tightly controlling the exchange rate over the long-term and that it should now consider a more suitable policy.

Contrary to this, however, banking expert Nguyen Dac Hung said stability had more advantages than disadvantages by driving down the psychology of hoarding dollars, as well as halting the dolarisation trend. It has also helped the central bank replenish its foreign currency reserves and reduced public debt.

Head of the SBV’s Foreign Exchange Management Department Nguyen Quang Huy said both the exchange rate and inflation are intertwined. A stable exchange rate helps the SBV stabilise the macro economy and management authorities should carefully consider ulterior consequences before revising any policies.

Hung added that the stable exchange rate has helped banks get strong returns from their foreign exchange services.

“By the end of 2012, one commercial bank had made more than $23 million from their foreign exchange business. Most banks were profitable in this area in 2013,” said Hung.

Sacombank general director Phan Huy Khang said foreign exchange was one of the bank’s few strengths at a time they are losing greatly from diminishing credit demand.

Financial statements from 13 commercial banks showed that in the third quarter this year, foreign exchange and gold business brought in over VND670 billion ($32 million) against $33.5 million in losses over the same period last year.

Binh Duong names priorities in investment attraction

The southern province of Binh Duong has named six priority fields in calling for investment in 2014.

The six fields are electrical-electronic industry, supporting industry, precision mechanics, basic chemical industry, medical and pharmaceutical equipment and high-quality food processing.

The province will encourage the application of technologies that help save energy, fuel and materials during production.

It also focuses on raising the local content as well as value and competitiveness of products, minimising labour use, and developing industry in line with environmental protection.

More than 1.2 billion USD has been poured into the province this year, driving its total FDI so far to nearly 19 billion USD.

Foreign-invested projects in the province have been operating effectively, earning major production and export values, with strength in garments, wood products, footwear, electronics and food processing.

Development partnership forum to be held in Hanoi

The Vietnam Development Partnership Forum will be held in Hanoi on December 5 to discuss how to build new partnerships for sustainable, competitive and comprehensive growth in Vietnam.

Speaking at a press conference to announce this information in Hanoi on December 2, Minister of Planning and Investment Bui Quang Vinh said Vietnam has entered the threshold of a low-average income country, while the country’s partnerships with its development partners have been seeing changes suitable for the current situation of aid in the world and Vietnam.

Therefore, the Vietnamese Government and donors agreed to replace the Consultative Group (CG) meeting with the forum, with the participation of all development partners in Vietnam, Vinh added.

Victoria KwaKwa, Country Director of the World Bank (WB) in Vietnam, said the WB wants to share experience to help Vietnam make progress in its socio-economic development, expressing her hope that Vietnam will gain new development strides in the future.

Attendees to the forum will include development partners participating in planning and implementing policies and development cooperation programmes in Vietnam, including representatives from the authorities at all levels, bilateral and multilateral sponsors, social organisations, internal and external non-governmental organisations, the private sector and research agencies.

Minister Bui Quang Vinh said the event will focus discussion on development priorities as well as medium-term challenges in defining and implementing Vietnam’s socio-economic development policies.

Maintaining stability, the restructuring of the economy and growth recovery will be major issues deliberated at the event.

The CG is an annual dialogue on development policies and partnerships with international donors, as well as a forum to outline priorities to mobilise and utilise official development assistance (ODA) funds to Vietnam. It is also a platform for international donors to announce ODA commitments to Vietnam.

Dong Nai’s 11-month export reaches 10 bln USD

The southern province of Dong Nai fetched some 10 billion USD from exports in January-November, up 8.7 percent year on year.

Of the figure, over 1 billion USD was generated in November alone, a rise of 1.2 percent from the preceding month.

Key foreign-currency earners include garments, computers, coffee, rubber and cashew nuts, which have all reached the US, Japanese, Chinese and European markets.

The provincial Department of Industry and Trade, however, admitted that local exporters face a lot of challenges this year like volatility in overseas markets and fierce competition, especially for farm producers who have seen export values fall.

In November, concerned local agencies met with some exporters to make it easier for them to access loans, declare tax and customs and apply for energy-efficiency labels.

On November 24-30, 11 local firms joined a trade promotion delegation led by Deputy Chairwoman of the provincial People’s Committee Phan Thi My Thanh to visit Dubai city in the United Arab Emirates – a key potential market, especially for agro-fisheries products, spices, food, construction materials and tropical fruits.

Viet Nam exports cow feed to Japan, RoK

The Viet Nong Lam JSC, operating in the southern province of Dong Nai, will continue exporting feed for dairy cows to Japan and the Republic of Korea (RoK) next year.

According to Ho Sau, the company's Chairman of the Board, Viet Nong Lam has signed contracts to ship some 36,000 tonnes of feed to the two Asian markets during the first six months of 2014.

The company's dairy cow feed is produced from the fermented stems of corn, corncob, peanut shells and cassava bark, as part of a research project implemented by Ho Sau.

Further, Ho Sau said the company is investing in modern machinery and expanding its plant in order to increase its production capacity to 10,000 tonnes of products per month.

In addition, Viet Nong Lam will carry out research projects to manufacture cattle feed from corn, cassava and other farm produce waste, while promoting its new products in domestic and foreign markets.

Binh Duong names priority sectors for investment

The southern province of Binh Duong has named six priority fields, while calling for investments in 2014.

The six fields are electrical-electronic industry, support industry, precision mechanics, the basic chemical industry, medical and pharmaceutical equipment and high-quality food processing.

Further, the province will encourage the application of technologies that help save energy, fuel and materials during production.

It also focuses on raising the amount of local content used in manufacturing products, as well as the value and competitiveness of products, minimising the use of labour, and developing industry in line with environmental protection.

More than US$1.2 billion has been poured into the province in 2013, driving its total FDI to nearly $19 billion, so far this year.

Foreign-invested projects in the province have been operating effectively, earning major production and export values, with strength in garments, wood products, footwear, electronics and food processing.

Stability key to domestic bond market

Viet Nam needs a stable economic and financial system to create a sustainable bond market in the future, according to experts.

Participants gathered for a workshop, entitled "Macroeconomic stability and sustainability of bond market in Viet Nam" yesterday in Thua Thien Hue.

Viet Nam's economy in 2013 had many opportunities and development challenges. In recent years, the government has directed and managed the economy to achieve many positive results, Vu Bang, Chairman of the State Securities Commission, said.

He was delivering an opening speech at the workshop sponsored by the Deutsche Gesellschaft fr Internationale Zusammenarbeit – GIZ (former German Technical Cooperation – GTZ) and Ha Noi Exchange Board (HNX) in Thua Thien Hue.

The domestic economy has been stable and inflation controlled at 4.63 per cent during the first nine months of this year, he said.

Interest rates from deposits and loans have fallen, while exchange rates of Vietnamese dong and foreign currencies have remained stable and foreign exchange reserves have increased.

However, the economy has been hindered by difficulties, including a lack of stability of the macro economy, difficulty in balancing the budget and a high level of bad debt.

The difficulty in the economy had affected the stock market of Viet Nam, he said. But, on the bond market, the total value of listed bonds stood at VND521 trillion (US$26 billion), up 28 per cent compared with the same period in 2012.

Government bonds are dominant in the Vietnamese bond market. Both size and liquidity of the government – guaranteed bond market are very low.

The enterprise bond market does not play an important role, nor is it well managed, said Dr. Michael Krakowski, Chief Technical Advisor of GIZ Macroeconomic Reforms Programme.

Products available in the bond market are limited and simple. New products, especially derivative products which could help to activate the market to improve its liquidity and to act as hedging tools, are not available, or unofficially implemented without any appropriate governing legal framework to regulate, monitor and ensure sound and safe transactions.

All frame conditions for the bond market are currently unstable and lack sustainability, such as a high state budget deficit, difficult budget income sources and high bond interest rates.

About 80 per cent of total volume and value of bond transactions are currently performed by commercial banks. Bond market instability, if any, would be a serious danger for the banking system, as well as for the entire Vietnamese financial system.

"The key solution to achieving a stable, sound and sustainable bond market is to continue efforts aiming at macroeconomic and financial system stability. Restructuring financial markets toward stabilization and strengthening risk management would be the necessary step to be made," said Krakowski.

"In addition, technical solutions would need to be developed and deployed, accordingly. Viet Nam would need to implement proper public debt strategy and develop models to forecast supply and demand in the bond market, which take into consideration key factors, such as budget, public investment, changes in monetary markets and interest rates, as well as requirements of issuing new bonds to pay back existing debt."

"In the medium and long run, Viet Nam would need to gradually move towards lower budget deficits and sustainable balances budgets.

It is also vital for Viet Nam to quickly implement regulations and plans on new bond products and shifting the bond settlement system to the State Bank of Viet Nam in order to ensure market soundness, and improve risk management."

Gas hike casts doubt on monopoly

The large hike in gas prices beginning on December 1 has shocked many local consumers, while experts pointed to it as a sign of the existence of a monopoly.

Prices have increased by VND44,000 (US$2.2) since June, but following this most recent price hike, consumers must pay another VND80,000 (nearly $4) per canister (12kg), making this the highest price since December last year.

Comparing different shops, the price for canisters is now listed between VND450,000($21.4) and 495,000($23.3) in the local market.

The price increase caused Pham Thi Minh from Ngoc Khanh Street, Ha Noi, to no longer order from her usual provider, since she now checks prices from other vendors.

"It is so unfair, I have nothing added to my retirement, yet prices of everything keep rising; first electricity and now gas, and it is just too much" said Minh.

She has since ordered from a new gas shop because they offered her a reduction of VND50,000($2.5) on her first order.

In Da Nang City, Nguyen Thi Huong Lan, a worker, said the price increase was unexpected and too high for workers like herself, wondering whether she could save enough money to send some home to her parents.

While gas companies explained that the hike was due to rising gas prices throughout the world during December, yet experts suspected a different reason for the hike.

Among providers, Nguyen Thi Thanh Hong, deputy director of Sai Gon Gas Petrolimex Company, said one tonne of gas increased $267.5 on world markets in December, so there was no alternative but raising local prices.

However, economist Le Dang Doanh seemed not to be convinced with this explanation. He told Tuoi Tre newspaper that the gas market was not being operated transparently.

Doanh suspected some local enterprises were holding their gas in storage, waiting for global price hikes to increase the price of their stored gas.

Meanwhile, Nguyen Ngoc Son from the University of Economics and Law in HCM City told the local press that in a market where most gas companies raise their prices to the same level, they cannot be said to be operating in a competitive market.

According to Son, there were 30 major gas companies in Viet Nam which own different purchase contracts set at different prices.

But on Sunday, these companies all posted their new increased price of VND78,000 or 79,000 (around $4) per canister, which made Son think there exists a collective monopoly.

While Doanh and Son said the Viet Nam Competition Authority should work to find the reason for the price hikes, deputy chairman Tran Van Thanh, on behalf of the Viet Nam Gas Association, sent a request to the Ministry of Finance on November 28 asking for a reduction to zero per cent of the current 5 per cent tariff on gas products.

If the tariff is reduced to zero, a reduction of VND17,000($0.8) per canister could be passed along to the public.

Industrial production growth heralds economic recovery

The regular growth of the industrial sector over the last several months reflects the distinct signs of recovery that the Vietnamese economy is showing, according to the Ministry of Planning and Investment (MPI).

MPI Deputy Minister Dao Quang Thu has told a cabinet meeting that in the first 11 months of the year, although the country's industrial production increased by only 5.6 per cent year-on-year, this growth rate has been maintained for several consecutive months.

A report tabled at the meeting also said that apart from the improved industrial sector performance, the service sector has continued developing thanks to the Government's support.

The support has also seen production pick up in forestry, fisheries and aquaculture, the meeting heard.

In November, the industrial product index was up by 2.6 per cent over the previous month, marking a year-on-year increase of 5.7 per cent.

In the industrial sector, the processing and manufacturing industries sectors had registered the highest growth rate of 7.1 per cent.

Pham Cong Vinh, deputy director of the General Statistics Office, said that it was the processing and manufacturing industry's high growth that lifted the entire sector.

A representative from the Ministry of Industry and Trade also said that exports of the processing and manufacturing industry in the first 11 months of the year had made important contributions to the country's export value.

In spite of the positive signs, the picture of economic growth at two of the country's biggest economic hubs, HCM City and Ha Noi, is not all that rosy.

According to the HCM City Department of Planning and Development, four of the 25 growth targets that the city had set for the year are not likely not be realised, two of which are investment attraction and budget collection.

This means that the city's Gross Domestic Product (GDP) is expected to reach 9.3 per cent by the year-end instead of the targeted 9.5 per cent.

Meanwhile, an official with the Ha Noi Department of Planning and Development said that because of low purchasing power, many enterprises in the city had mainly focused on settling their inventory problem and not paid much attention to investment for further development.

Consequently, although the city administration had set aside preferential loans worth VND100 billion (US$5 million) to support its enterprises, just VND20 billion ($1 million) has been disbursed to date, he said.

Nguyen Mai, former chairman of the State Commission for Cooperation and Investment, said that Viet Nam's economy still had much potential to develop in coming years.

However to do this effectively, private enterprises should be given priority to develop, Mai said, adding that the private economic sector could bring about an additional growth rate of between 1 and 1.5 per cent for the economy per annum.

He also stressed the need to strongly develop support industries for foreign invested enterprises and to quickly remove obstacles in disbursing the VND30 trillion ($1.5 billion) housing stimulus package.

If this credit package was disbursed it would catalyse growth in several important economic sectors including construction and construction materials, creating employment for thousands of people, adding around 1 per cent to the nation's GDP growth every year, Mai said.

Conference to develop cashew sector takes place in HCM City

The cashew industry needs to map out an appropriate development strategy as cultivation areas have shrunk, delegates told a conference on sustainable development in HCM City last week.

According to the Viet Nam Cashew Association (Vinacas), the plantation area fell from nearly 440,000ha in 2007 to 360,000ha now.

Viet Nam now ranks third in the world, down one spot, and is expected to drop further to the fourth position, after India, the Ivory Coast and Brazil, Vinacas said.

Nguyen Duc Thanh, Vinacas's chairman, said the unstable price of cashew nuts and low productivity had prompted many farmers to replace their cashew trees with other industrial ones.

Although many farmers produce a high-yield cashew, the cultivation areas of this type of cashew remained small compared to the total cashew cultivation area, he said.

"Most of the cashew cultivation areas have not received proper caring techniques, and offered low yields," he said.

"Viet Nam has processed about one million metric tonnes of raw cashew nuts a year, but domestic production has met only 50 per cent of the demand."

It annually imports about 500,000 tonnes of raw cashews from other countries, of which imports from African countries accounted for 300,000 tonnes, he said.

At a cashew buyers and sellers meeting in HCM City last week, many African raw cashew suppliers also called on Vietnamese firms to invest in processing the nut in their countries. African countries, as a result, would limit the exports of raw cashew in the future, making it hard for local processing firms to import the raw materials, Thanh said.

Hoang Quoc Tuan, director of the Agriculture Planning Centre, said the cashew industry must change its development outlook.

"Previously, we thought that cashew trees should be plant in areas that are not suitable to plant other trees. This should be changed, just cultivate it at suitable areas," he said.

In addition, advanced science and technology should be used in cashew cultivation to improve productivity and product quality, he said.

Nguyen Trong Thua, head of the Agro-Forestry Processing and Salt Industry Department, said the cashew industry, which is one of nine major farm production industries, would be restructured under the general policy of the agricultural industry.

The cashew industry must focus more on more research to create seedlings with a high productivity, he said.

Localities should develop zoning plans for cashew cultivation areas and help farmers with planting techniques and other support to increase incomes for farmers, which would contribute to ensure a stable material zone for the cashew industry, he said.

Viet Nam expects to export about 250,00 tonnes of cashew nut this year for a value of US$1.55 billion. Including the exports of cashew kernel oil, export revenue could top more than $1.8 billion, Thanh said.

Source: VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VIR

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