Better liquidity needed for interest rate cuts: expert

Only when liquidity problems at commercial banks are tackled, sky-high interest rates could be cut to make life easier for borrowers, said Le Xuan Nghia, vice chairman of the National Financial Supervisory Commission.

In the year to date, inflation in the nation has been low, with a rise of just 2.37% from late last year compared to an increase of 3.35% in the same period last year. Nghia said yearly inflation was normally double the first-quarter number.

Therefore, Nghia forecast, the inflation rate in 2012 will be much lower than expected, at roughly 6.5%. “The banking system should have pulled down interest rates in line with the fall of inflation but they have yet to do so due to the liquidity crunch,” Nghia noted.

In fact, larger lenders are holding ample capital as they have invested heavily in Government bonds with terms of less than five years to net a coupon of below 12% annually, Nghia explained.

In related news, Bao Viet Securities Co. reported that the total transaction volume of the whole bond market from February 13 to 17 reached VND1.81 trillion, up 81% against the previous week. Notably, the majority of investors joining the market are local credit institutions.

Liquidity woes in reality are only problematic for a number of smaller banks, but this has hampered the economy and the road map to cut rates at the request of the central bank, Nghia pointed out.

He attributed the situation to local residents’ doubt of the effectiveness of macroeconomic stabilization policies and the credibility of the banking system.

Those local lenders struggling to lure depositors tend to reject borrowers to minimize credit risks, he said. Meanwhile, many borrowers have found banking loans out of their reach because of high rates, he stated.

As a result, Nghia said, the cash flow has been choked off and has created little added value.

Nghia believed liquidity problems won’t be solved drastically within the first quarter. He insisted the problems must be handled in a thorough way throughout the year, especially in the third quarter.

Nghia cited some solutions to improve liquidity at local lenders, including speeding up capital circulation. Capital flow in Vietnam in the period prior to the financial crisis had been three cycles a year but it fell to 0.8 last year.

To improve capital flow, Nghia suggested the central bank should regulate capital via compulsory reserves and promptly merge weak banks with one another. He even urged the authority to allow some lenders to trade gold deposits on international markets.

The central bank should restructure bad debts as soon as possible since the current capital shortage at local banks has resulted from bad debts, he added.

US reduces anti-dumping tariff on Vietnamese shrimp

The Department of Commerce (DOC) of the US has announced the sixth preliminary results of administrative review (POR6) on frozen shrimp imported from Vietnam in the period from February 1, 2010 to January 31, 2011.

Accordingly, the Minh Phu and Nha Trang Seafood companies will enjoy the zero percent duty.
The 0.8 percent rate will be levied on Camimex alone and the 1.03 percent tax will be paid by others.

This is the third adjustment the DOC has made to its anti-dumping duties levied on Vietnamese shrimp so far.

According to US regulations, import businesses must pay their taxes in advance based on the previous administrative review and taxes will only be collected when a new administrative review is announced.
 
S.Korea’s Jeju seeks to lure more Vietnam tourists

Jeju Island, in a bid to attract more Vietnamese to visit South Korea’s special self-governing province, has guaranteed it will extend financial aid for travel firms that bring local travelers there on chartered flights.
 
HCMC vice chairwoman Nguyen Thi Hong and Woo Keun Min, governor of Jeju Special Self-Governing Province, at their meeting at the city hall on Tuesday

The island’s authorities will give $3,500 to travel companies for each tour they arrange, according to the Jeju authority.

A tourism promotion program by the Jeju tourism authority took place on Tuesday in HCMC with the presence of multiple local tour operators. In his meeting with HCMC vice chairwoman Nguyen Thi Hong, Jeju governor Woo Keun Min said one of his visit’s goals was to promote travel to the island.

Jeju, which is promoting itself as one of the world’s new seven wonders, will help finance many other costs such as on advertising, new product development and tour arrangements.

Between October and December in 2011, hundreds of Vietnamese traveled to Jeju a week on chartered flights. At present, Vietnamese people can enter the island under a visa-free travel scheme.

More Vietnamese visitors have come to South Korea in general and Jeju in particular. In 2006, only 46,000 Vietnamese visited South Korea but the figure in 2011 shot up to nearly 106,000, which was 17 per cent higher than the previous year.

The HCMC Department of Culture, Sports and Tourism said South Korea last year emerged as a popular destination for local travelers. It is estimated over 50,000 Vietnamese last year traveled to South Korea via Tan Son Nhat International Airport in HCMC, a surge of 20 per cent versus a year earlier.

South Korea is also HCMC’s fourth largest visitor-generating market, so the city has had some tourism cooperation programs with the Korean side.

The Jeju tourism authority early this month signed a memorandum of understanding (MOU) with the HCMC tourism department to jointly carry out tourism promotions. In the MOU, Jeju will help the local tourism sector develop human resources, train Korean-speaking tour guides and attract tourists from South Korea to HCMC.

The two sides will join forces to develop MICE (meeting, incentive, convention and exhibition) tours as well as encouraging travel agencies to offer tour buyers promotional programs besides many other activities.

The Jeju tourism authority this weekend will leave for Hanoi.

Long An to invest in road systems

The southern province of Long An plans to mobilise VND57.8 trillion (US$2.75 billion) to build and improve its road and inner waterway systems between 2012-2020.

These projects will be funded by the provincial budge, State bonds, private capital investors, FDI and projects under the Build, Operate and Transfer, and Build and Transfer models.

According to the provincial people's committee, it is going to mobilise VND39.6 trillion ($1.885 billion) to build nearly 400km of roads and dredge 600km of waterways on the Thu Thua, Chanh, Tra Cu, Bac Dong and Chanh canals by 2015.

Between 2015-2020, more than VND18.2 trillion ($866 million ) is planned to be used to construct roads and bridges connecting towns and central areas.

Also under the plan, Long An Port and small wharves will also be built, improved and put into operation.

According to the province, favourable investment and land clearance policies will be formed to attract investors. –

Commercial rice volume surges, price volatility predicted

This year’s winter-spring crop in the Mekong Delta will be a bumper one, yielding about 10.5 million tons of paddy (unhusked rice), including some four million tons of commercial rice, which may pull down the price, the agriculture ministry said.

The ministry forecast the Mekong Delta alone would churn out 10.5 million tons of paddy from the cultivation area of about 1.56 million hectares for the winter-spring crop.

Provinces in the region last month harvested a total of some 1.17 million tons of paddy, and the production is expected at roughly 2.7 million tons and 5.8 million tons in February and March, respectively. The output of paddy to be harvested in April is estimated at one million tons.

Meanwhile, the rice stock as of February 16 had amounted to almost one million tons, according to the ministry.

The agriculture ministry expected the local consumption in the first four months of the year at around three million tons of paddy, resulting in a commercial volume of 7.4 million tons, equivalent to some four million tons of rice, let alone the stock carried over from last year.

Meanwhile, the accumulated export contracts as of February 16 stayed at 1.45 million tons of rice, down 23.21% year-on-year. In the year to February 16, the country as a whole had shipped 430,000 tons of rice abroad worth US$226.15 million, dipping 47.01% in volume and 44.24% in value from the year-ago period.

The agriculture ministry in a recent dispatch has urged the Ministry of Industry and Trade and related agencies to buy more rice from farmers in a timely manner. This action is to prevent traders from creating downward pressure on paddy prices as well as expand outlets for rice of the winter-spring crop.

It also suggested that the central bank order commercial banks to give soft loans to members of the Vietnam Food Association (VFA) so that they could stock up on one million tons of rice for three months. The scheme is also meant to buoy up prices in case the paddy price falls below VND5,000 per kilo.

According to the ministry, the total output of paddy this year will reach about 42.5 million tons, some 200,000 tons higher than in the previous year. Northern provinces will enjoy total output volume of around 13.69 million tons while southern provinces will harvest around 28.76 million tons, with the Mekong Delta reaping roughly 23.44 million tons, up nearly 80,000 tons versus one year earlier.

The local rice demand is said to be about 29 million tons. This means the total commercial volume for the whole year of 2012 will be 13.5 million tons of unhusked paddy, equivalent to 7.3 million tons of rice exclusive of 1.1 million tons transferred from the 2011 inventory.

In related news, the price of unhusked paddy in the Mekong Delta has increased by some VND1,000 a kilo owing to more shipments bound for China as well as the announced intention by VPA to buy rice for stockpiling.

In Dong Thap Province’s Sa Dec Town, between six and seven vessels of 2,000 tons each are buying rice from farmers for export to China, said Tran Bao Toan, a rice trader at Dong Loi Company in the province.

Toan said the low-grade IR 50404 paddy is selling for VND5,000 a kilo compared to VND4,000 a kilo days earlier, and traders purchase the commodity from mostly Dong Thap and An Giang provinces for export to China.

Last year, Vietnam shipped nearly 310,000 tons of rice to China to obtain revenue of US$161 million, increasing by 148% and 194% year-on-year, according to customs figures.
 
Belgian economic mission to come knocking

The largest-ever Belgian economic mission consisting of almost 300 Belgian business executives will come to Vietnam from March 11 to 16, with numerous agreements to be signed with Vietnamese partners.

The mission headed by Prince Philippe of Belgium, Deputy Prime Minister and Minister of Foreign Affairs Didier Reynders, and three ministers will visit Hanoi and HCMC with events-studded programs aimed at strengthening economic, social and technological relations between the two countries.

The mission members are active in water and waste management, transport, port and logistics, space technology and healthcare, Belgian Ambassador Bruno Angelet said at a press conference in Hanoi on Tuesday.

The ambassador said that some 40 agreements between the two countries would be signed and a credit fund for Vietnamese small and medium sized enterprises would be established during the visit.

Angelet said the economic mission visit would provide a great opportunity for the Belgian companies to explore what the Vietnamese market is offering, and for Vietnamese companies to meet new reliable and high quality business partners.

During the week-long trip, Prince Philippe will meet leaders of Vietnam, make important field visits to industrial zones, and witness important signing ceremonies between Belgian and Vietnamese companies, universities and other institutions.

There will be 40 contracts to be signed between firms in the two countries during this visit, the diplomat said.

The business delegation will also take part in four different seminars including Belgian know-how in port development, logistics and transport; Belgian know-how in the field of water and waste treatment; agro-food and aquaculture technologies, and affordable quality healthcare for all.

In the future, Belgium will also focus on encouraging Vietnamese small and medium sized enterprises and start-ups by establishing a credit fund for the purpose.

“The Belgian side will launch a credit fund for this mentioned type companies,” said the ambassador.

Belgium exports around US$275 million worth of goods to Vietnam every year, and imports around US$848 million worth of Vietnamese goods. Belgium exports mainly chemicals, medicines, steel and other metals, and equipment and machinery to Vietnam, while Vietnam exports footwear, textiles and garments, and vegetable products to Belgium.

Belgian companies have invested US$108 million in Vietnam, mainly in strategically important sectors such as dredging, port management, health care, biotechnology, satellite technology and waste water treatment.

Belgium also provides around US$25 million in official development assistance (ODA) a year, mainly in water sanitation programs, education and scholarships to aid capacity development in Vietnam.

Vietnam biggest firms owe huge tax arrears

The General Department of Taxation is trying to recover debts from some of the country’s biggest firms that complain they have been affected by the economic downturn.

At the seminar to address outstanding tax arrears on March 1, the General Department of Taxation under the Ministry of Finance announced outstanding tax arrears. Bad debts accounted for 1.1% of the State budget, a 0.1% increase compared to 2010, while those tax arrears likely to be recovered equalled 5.9%, a 0.8% increase compared to 2010.

The General Department of Taxation said those bad debts that would have to be written off were often the result of voluntary bankruptcy in cases where enterprises had not reported their closure to authorities. These companies accounted for 56.7% of total bad debts. The remainder was from firms established to illegally issue invoices which had subsequently closed to avoid their tax responsibilities.

But 72.3% of the debt is in the form of recoverable tax arrears, with 63.3% 90 days overdue.

Domestic giants such as the Hoang Anh Gia Lai Corporation owe the state hundreds of billions of VND. Other corporations owe tens of billions of VND, including the ship builders Vinashin, the Hanoi Construction Corporation and Cavico Bridge and Tunnel Construction Corporation.

The General Department of Taxation said these companies are currently unable to pay taxes because of the economic downturn, weak consumer spending; a real estate market in the doldrums or because of the Government’s tightened fiscal policy. Many companies have chosen to keep the money as operating capital and have rather be fined than make their full payments. Total tax arrears currently account for 6.9% of last year State Budget.

Entertainment industry gives a boost to tourism market

Vietnam’s entertainment industry known as a show biz is flying off to a good start that stimulates the growth of different economic sectors, particularly the tourism market.

According to Vietnamese and foreign economic experts, investment in the tourism industry along with development of bonus-added entertainment services in the northern province of Quang Ninh has a solid foundation.  

A large-scale leisure complex in the Van Don economic zone- one of the key economic projects in Quang Ninh is expected to get off the ground soon.

According to plan, a sports and leisure complex and a casino will take shape on an area of 2,000 hectares in Van Yen commune with a total capitalization of more than US$4 billion.

Vu Tien Loc, Chairman of the Vietnam Chamber of Commerce and Industry (VCCI) says that Quang Ninh should focus on developing major entertainment centres to attract more tourists. However, planning work need to fit in with the national development strategy as well as policies and regulations on investment and management.

Judging from developments in Japan, the Director of Cool Japan Project under the Japan Ministry of Economy, Trade and Industry, Watanabe, shares his view ,”The entertainment industry has contributed greatly to Japan’s growth. In the face of growing demand for recreational activities, we are focused on games, cinema, cruising and other aspects of tourism.”

Based on its traditional culture, Japan has invested in digital technology theatres and recreational parks, producing high-tech films, and launching major shows of performing arts.

The Director of Japan’s Asia & Overseas Yoshimo Creative Agency Co.. Ltd, Ryutaro, says since 2011, Okinawa province has organized carnivals with special song & dance and comedy performances, attracting more than 270,000 tourists.

Vietnam has been moving with caution towards bonus-added entertainment services with just a few provinces and cities pouring capital into this area.

The Director of the Quang Ninh provincial Planning and Investment Department, Tran Duc Lam, says the province annually receives nearly 3 million tourists who stay for just one day on average. This figure is far too low to compare with Quang Ninh which is blessed with world famous natural scenery. General speaking, the tourism industry is still running short of tourists for its low quality services.

The Chairman and CEO of GM Hong Kong, Tetsu Asano, insists that many Governments in Asia need to support investors in their casino projects with high quality customer care services.

According to VCCI Chairman Vu Tien Loc, the Vietnamese Government has a plan to develop its tourism model with different bonus-added entertainment services as already approved as in Phu Quoc island district, Phu Yen, Hoi An, Danang and Vung Tau.

He says the Ministry of Finance is responsible for drafting a casino development project under State control to ensure security and social order.

Prices may spring in March on utilities, goods price hikes

The recent adjustments in the prices of many utilities and goods will put more pressure on price levels this month.

With the recent increase of VND52,000 per 12-kilogram gas cylinder, and a possible price increase in fuel and electricity, utilities costs, often considered as the main input costs for many sectors, may hike in March.

In February, gas traders shipped 70,000 tons of liquefied petroleum gas (LPG) worth $75 million, bringing the total LPG import volume and value in the first 2 months of this year to 142,000 tons and $142 million, up 203.6 percent and 215.6 percent year on year respectively, according to the General Statistics Office (GSO).

The import price for February is $1,000 per ton, up from $921 per ton one month ago and $802 per ton in December 2011.

The 10 percent rise of coal in February 25 will have a negative impact on relative industries like paper, cement and fertilizer from March onwards.

"With import prices of oil ranging between $132-137 a barrel since February 25, we are bearing a loss of VND1,000 and VND800-900 per every liter of gasoline and oil sold," Vuong Dinh Dung, general director of Military Petrochemical Joint Stock Co, told newswire Vietnam Business Forum.

The data has excluded the recent import tax reduction for gasoline and oil and the subsidies of VND780-1,610 per liter/kilogram of fuel extracted from the national petroleum stabilization fund.

The prospect for future price hikes is very likely, as the world price of petroleum products remains high and will probably rise due to the increasing tension between oil powerhouse Iran and the Western world, led by the US.

So, a price increase, if permission from relevant state agencies is received, should be enough to cover our losses, he said.

Vuong Thai Dung, deputy director of Petrolimex, Vietnam’s biggest petroleum trader with 60 percent of the local market share, said the tax reduction could not save the day for petroleum importers.

The situation is getting more tense, as further tax cuts won’t be made and the fund to cover our losses is getting thinner and thinner, the vice head of Petrolimex, also a stakeholder of MIPEC, said.

A representative from SaigonPetro, another trader, said it had sent a document asking the Ministry of Finance to give the green light for a price increase of VND1,000-1,500 per liter on February 21.

The Ministry then replied with the tax reduction decision, but it just made up some VND600-700 of our losses.

The Ministry said the tax cut, plus the subsidies from the fund, would help traders to break even, but it did not happen as expected, SaigonPetro said.

The fund at SaigonPetro had dried out, it said.

The state-run Electricity of Vietnam Group often picked March as the time for price increases during the last two years, with a 6.8 percent and 15 percent rise in march 2010 and 2011 respectively.

The 15 percent rise last year, or additional VND1,240 to pay for every kilowatt hour used, did not meet EVN’s expectation of VND1,500 per every kilowatt.

So, EVN added one more 5 percent price hike in December, and put real pressure on many goods and services ahead of the traditional Tet (Lunar New Year) holiday.

It has sought government permission for a fresh price adjustment in 2012, but has yet to get the go-ahead.

The Government has stated that macroeconomic stabilization, mainly controlling inflation so that it will rise less than 10 percent year on year, is the utmost target in 2012, and so, with a nod for EVN to hike prices, the target will become much harder to achieve.

The national outbreak of bird flu disease is an unknown, and of course, an unwelcomed factor, for the price of food due to a shortage in supply, which is an important element for the calculation of the consumer price index (CPI) in March.

The trade departments of many big supermarkets, including Maximark, CitiMart, and Co.op Mart told Tuoi Tre that they have been informed of a price hike by 5-10 percent for dairy products and cosmetics.

Most of the products are manufactured by multinational companies with production facilities in Vietnam.

Some bottled drinking water distributers have also announced to increase prices by 8 percent due to rising input costs.

Some 400 medical services will increase prices next month, according to a recent decision from the Ministry of Health.

According GSO, the total value of retail sales of goods and services last month slipped 2.4 percent month on month to VND186.46 trillion, bringing the rate in January-February to VND380.3 trillion, up 4.4 percent excluding price increase factor.

Lao carrier to fly to central VN

Lao Airlines has announced the launch of a thrice-weekly Pakse - Savannakhet - Da Nang air service from mid-April.

A 65-seat ATR-72 aircraft will leave Pakse at 9.30am, touch down at Savannakhet at 10.10am before arriving in Da Nang at 11.40am on Tuesdays, Thursdays, and Saturdays.

The return flights will leave for Savannakhet at 2.10pm on the same days.

The Lao carrier will first bring a delegation of tour operators, hoteliers and journalists on a trip to Da Nang and other localities next week to explore tourism products.

Real estate sector accounts for 72 pct of tax debts

The real estate sector accounts for 72.3 percent of the total unpaid taxes, worth thousands of billions of dong, held by a large number of major businesses, confirmed a chief tax official at a meeting Thursday.

Cao Anh Tuan, deputy head of the General Department of Tax under the Ministry of Finance, attributed the huge tax debts to the businesses’ loss-stricken operations under the sluggish real-estate market.

Businesses operating in the real-estate industry belong to the group with highest unpaid taxes, said Tuan.

“Many property projects have received land, but were financially unable to clear the taxes and land using fee,” he said.

“Consequently, they owe land-related taxes worth thousands of billions of dong.”

Real-estate giant Hoang Anh Gia Lai Group has a total tax debt of hundreds of billions of dong due to the frozen market, according to a report from the tax department.

Other businesses with high unpaid taxes include the Thanh Cong Coal Corporation, Phu Yen Brewery Co, Vinashin, Hanoi Construction Corporation, and Cavico.

However, Tuan said most of the tax debts of businesses with troubling operations are collectable.

According to the tax department, the ratio of collectable tax on total state budget collection in 2011 was 5.9 percent, rising 0.8 percentage point compared to a year earlier.

Meanwhile, the ratio for bad debt was 1.1 percent, a 1-percent increase from 2010.

Giant retailer cuts deal to enter Vietnam

Takashimaya Singapore Ltd, a leading department store operator in that island country, has clinched an agreement to be the anchor tenant in Keppel Land Watco’s Saigon Center Phase 2 also consisted of retail levels currently under construction in downtown HCMC.

Keppel Land Watco told the Daily on Wednesday that this joint venture company has clinched a conditional agreement with the subsidiary of Takashimaya Co. Ltd, one of Japan’s leading department store operators, to pre-commit some 15,000 square meters of retail space across five floors of Saigon Center Phase 2.

The deal signing about three months after the groundbreaking of the integrated mixed-use development on Le Loi Boulevard marks Takashimaya’s foray into Vietnam’s growing retail market as part of its strategy to further expand into Asia.

Keppel Land Watco said in a statement that with Takashimaya coming onboard as the anchor tenant, about 30% of the total retail area was pre-leased ahead of the development, which is scheduled to be up and running in 2015.

Kevin Wong, group chief executive officer of Keppel Land, commented in the statement that it was good that Takashimaya had selected Saigon Center as its choice location for its first retail mall in Vietnam.

“An established and quality brand in the industry, Takashimaya will complement and enhance the overall retail offerings at Saigon Center and HCMC as a whole,” Wong said.

Yoko Yasuda, managing director of Takashimaya Singapore, said with 18 years of retail experience in Singapore and its network of supply source, the company was confident of contributing to a new shopping lifestyle in HCMC through Takashimaya’s department store in Vietnam.  

“The Vietnamese retail market is entering an exciting phase of growth with an increasing middle income class and Takashimaya is looking forward to participate in this emerging market,” Yasuda said in the statement.

HCMC’s economy grew over 10% annually in the past years, giving much support to the city’s gross domestic product per capita increase. The city expected the GDP per capita would reach or exceed US$4,800 by 2015 from US$2,800 in 2010.

In its latest report on HCMC’s retail market, leading property services provider Savills Vietnam said the city’s double-digit GDP growth of around 10.3% last year despite economic difficulties was a good sign for the development of the retail market.

Savills Vietnam put HCMC’s total retail stock at 692,000 square meters of 96 projects and the average occupancy at 86% in its updates about this city’s retail market in the fourth quarter of 2011. The company calculated some 1.3 million square meters of future supply would enter the retail market in this economic hub of Vietnam from 2012 onward.  

Wong noted the strong pre-commitment by Takashimaya reaffirmed Keppel Land’s positive sentiments on the Vietnamese retail market. “Given our extensive experience in Vietnam, coupled with Takashimaya’s retail expertise and skills, Saigon Center is well-poised to become the shopping destination in HCMC,” he said.

Keppel Land said it would also jointly establish a 50:50 retail management company with Toshin Development Singapore Pte Ltd, the Singapore subsidiary under Toshin Development, to provide retail management services for Keppel Land’s projects in Vietnam.

Phase 1 of the Saigon Center went online in 1996, while the second phase is to be fully completed in 2015.
 
Investors yet to see sale-off in property market

Many foreign investors are seeking to buy cheap property products in Vietnam but there is yet any sale-off here, unlike in other countries.

Foreign investors coming to Vietnam expect local property investors to discount their products by a half or two-third, like in South America, but this expectation has never come true, said Le Xuan Nghia, vice chairman of the National Financial Supervisory Committee, at a conference on opportunities for the local realty market in 2012 held by Vietstock recently in Ho Chi Minh City.

The Asian region still maintains its growth momentum, he said, and Vietnamese property price drop is not due to any sale-off but the monetary tightening policy.
It is a temporary pressure, and when the policy is adjusted, the real estate market will grow again.

Nghia said the major financial source for the local property market is banks. Therefore, the important issue is whether lending rates will be lowered and how and when it happens.

In some countries, though the crisis has passed, interest rates are not reduced yet because the liquidity of the banking system is still in trouble.

Depositors have yet to believe in sustainable macro-economic situation; borrowers have yet to believe that the business environment will become favorable; and lenders are not convinced that the market is free of risks.

The fact that all the three parties are hesitant and afraid results in a decline in deposits and liquidity. Bad debts continue to surge, putting a burden on the banking system as well as the entire economy.

“Vietnam is experiencing the same situation,” Nghia said.

Although inflation has started to fall, interest rates cannot be lowered immediately as banks are struggling with liquidity problems, which stem from bad debts, most of which are related to the property sector, Nghia said.

Dang Hung Vo, former Deputy Minister of Natural Resources and Environment, shared Nghia’s view, saying that sale-off hasn’t occurred in Vietnam, despite discounts here and there.

The realty market currently revolves around capital sources, which are encountering difficulties because of banks’ liquidity problems.

Moreover, even when credit is loosened, hardly any investor can afford the current interest rate.

Nghia said addressing the liquidity problem is very difficult.

Several measures are being deployed, including increasing money supply and regulating capital between banks.

“If liquidity of the banking system saw positive changes in the second quarter, bank interest rates might cool down in the third and the fourth quarters,” Nghia said.

Last December, the Government issued a directive on the property market, stipulating stricter management of the market and credit flexibility for borrowers of certain loans, excluding those for new construction and speculation.

Several financial measures are under study and will likely be carried out this year to provide the market with more capital sources other than bank loans.

Particularly, the Ministry of Construction has submitted a scheme on a housing development saving fund and is gathering opinions from relevant agencies.

This is a close-end fund that will provide loans for social housing development and investment in housing for low-income earners.

Fund participants can apply for a home loan after contributing an equivalent amount to 30 percent of the house price.

The loans will be three times of the contributions with a lending period of 15 years and annual interest rates equal to half of the deposit rates plus one or two percentage points.

The fund will publicize contributions of its participants, along with its financial information. HCMC and Hanoi will pilot the fund in the next few months.

In addition, the scheme for establishing the housing development bank is being compiled for submission to the Prime Minister. The pivotal role will go to the Mekong Delta Bank, or a financial company under the central bank which specializes in housing and home loans.

Unlike the housing saving fund, the bank will be financed by official development assistance (ODA) capital, the State budget, government bonds and housing bonds.

Especially, the bank will only provide loans for buying and renting houses with preferential interest rates in 15-20 years, not for housing project development.

“The realty market can only develop in a sustainable fashion with strong support from buyers,” Nghia said.

However, if the housing fund scheme is rolled out this year, it will take 3-5 years for the fund to take effect given the time needed to mobilize contributions. The property lending bank scheme may bore fruit earlier, but the capital ranging from VND5-10 billion is little compared to the market’s demand.

These two financial institutions will help the market avoid unexpected fluctuations, Nghia said.

At present, the low-cost housing segment is playing the leading role in the market. Experts predicted the local property market from now to 2020 would mostly focus on this segment.

With many measures being implemented, Nghia forecast the real estate market would gradually warm up and prosper in 2013 and the following 4-5 years.
 
AIA Vietnam reports strong business growth

AIA Vietnam Insurance Company has reported its new business value, the key performance indicator measuring its business results, in the local market to increase by 29% in 2011 while total premium is forecast to rise by 25%.

In its preliminary review of 2011 business, the company also sees the number of in-force policies to increase by 21% against the previous year and raise insurance claims and policy holders’ benefits by 46%.  

Stephen Clark, CEO of AIA Vietnam, said in a statement released on Wednesday that the insurer will continue to focus on three core factors in its development strategy, customers, product competitiveness and agents, in the coming time to meet increasing demands of local clients.

AIA Vietnam currently serves around 300,000 policy holders across the country. Until the end of 2011, the insurer paid out a total of more than VND860 billion in insurance benefits for nearly 132,000 cases.
 
Local budget airline to launch new routes

Budget carrier VietJetAir last Thursday announced the launch of their new routes between Ho Chi Minh City and Danang, which will go into service on April 27, and between Hanoi and Nha Trang, which will begin on May 19.

The former will have two flights a day and the latter will operate one flight daily.

The carrier will also increase its flight between Ho Chi Minh City and Hanoi to 8 flights per day, starting on April 27.

VietJetAir, the first Vietnamese private carrier licensed to operate both domestic and international routes, officially entered Vietnam’s aviation market in late 2011 with one service between Ho Chi Minh City and Hanoi.

As of 27 February, 2012, the carrier has made 360 flights, carrying more than 40,000 passengers and achieving an occupancy rate of more than 90%.

The low-cost carrier plans to launch more domestic and international flights to Asian countries in 2012.

Grouping State-owned businesses - a must for restructuring

Grouping businesses to best advantage is an important element in restructuring State-owned enterprises.

According to a World Bank report, State-owned enterprises (SOEs) account for only one per cent of the total number of domestic businesses but they hold about 39 percent of total State-invested capital, 45 per cent of total fixed assets and 25 percent of bank loans. This shows an improper allocation of resources.

WB economist Deepak Mishra said though the number of SOEs has reduced sharply, those in operation fail to use their fixed assets and loans effectively.

SOEs only earn 1 dong in profit from 1 dong in investment while businesses in other economic sectors can get a good return of 21 dong, he said, adding that SOEs mostly earn 1.7 dong in return from 1 dong invested in labour employment but other businesses can get 16.3 dong.

Mishra said it is necessary to divide SOEs into three groups: group one consists of those that need immediate equitization (investors are allowed to buy up to 100 percent of stake), group two includes those that need rearrangement before equitization (investors are allowed to buy up to 49 percent of stake), and group three embraces those under 100 percent State ownership.

He also proposed applying the comprehensive restructuring mechanism including boosting the transparent process of information among SOEs, including State-owned economic groups; applying the modern business management system, and promoting the restructuring of SOEs, including parent companies of State-owned economic groups.

Nguyen Trong Dung, Deputy Director of the Business Innovation Department under the Government Office, said the number of SOEs has reduced from 5,655 in 2001 to 1,309 in 2011.

However, he said, many of SOEs are not yet prepared for rearrangement in both business operation and management.

Dung said businesses in other economic sectors are not willing to join State-owned economic groups operating in high-risk fields, which have low management skills and financial capacity.

Dung described grouping businesses as a key element in restructuring SOEs to improve their operational efficiency and competitiveness.

The State only maintains its 100 percent ownership in certain areas such as national defence and security, multi-purpose electricity production, key railway lines, airports and sea ports, he said.

Anyway, there remain certain snags in the restructuring of SOEs as it will affect some major economic groups, not to mention other problems such as redundant workers and high costs for restructuring.

Pham Viet Muon, Vice Chairman of the National Steering Committee for Enterprise Reform and Development, said it is crucial for the State to control businesses operating in important fields in order to use them as macro tools for regulating the market if need be.

Muon also emphasized the need to boost transparence and democracy in the restructuring of SOEs, which he said will improve supervision by authorities.

The Government has recently asked SOEs, including economic groups involved in important areas to submit their restructuring plans as early as possible in the first quarter of 2012.

Hanoi IZs look for investment

Industrial zones in the capital city of Hanoi aim to attract investment capital of U$$250 million in 2012.

To achieve this goal, the Hanoi Industrial and Export Processing Zone Management Board will promote investment activities, introduce Hanoi’s potential and offer preferential policies to investors.

The management board will also do its utmost to help enterprises develop their business and production activities.

In 2011, the board licensed 29 new projects and adjusted capital for 21 projects, worth totaling US$191.13 million, a year-on-year increase of 40.5 percent. IZ enterprises achieved high growth, with the total turnover of US$4.068 billion, up 13.8 percent from the previous year.

Export turnover reached over US$2.46 billion, up 15.5 percent, while import value increased by 17.7 percent to US$2.48 billion.

Up to now, IZs in Hanoi have had 510 registered projects and 115,100 workers.

Foreign businesses keen on investment in Vietnam

Many foreign businesses want to move their production bases from Japan, Thailand or China to Vietnam thanks to its competitive advantages, the French daily newspaper Le Figaro reported on February 29.

The move is attributed to Japan’s economic difficulty following the March 2011 earthquake and tsunami, historic flooding in Thailand and rising labour costs in China.

The newspaper said that popular brands like Samsung, Canon, Foxconn, Neon Led and Hazan Group have opened branches in Vietnam. The impact of natural disasters has made more than 200 Japanese groups switch their production bases to Vietnam, with an investment capital of EUR1.4 billion.

In July 2011, France’s SEB Group purchased Asian Fan, a leading electric fan producer while Nokia closed a factory in Romania to set up a facility in north Vietnam in late December 2011.

Formerly, almost all foreign investment projects in Vietnam focused on garment and textile, footwear or light industry products to take advantage of low labour costs in the country. The country is now trying to develop high tech and service industries.

In a report released last week, MacKinsey Global Institute affirmed that with its high quality human resources, Vietnam will probably become one of the six major destinations in the world specializing in providing coastal services, which generated 100,000 jobs in 2011 alone.

The paper said that France’s major universities are correct when they recommend launching MBA training programs in Hanoi or HCM City.

Spanish businesses eye Vietnamese market

Businesses from the Aragon region of Spain have begun a visit to the Philippines, Thailand and Vietnam from February 28 to March 7 to survey these markets.  

These businesses operate in such fields as lubricant oil, garments, air conditioning systems, metallurgy and lighting.

During the trip, they will sign cooperative agreements, establish partnership relations, and set up distribution channels for products, according to the Chamber of Commerce and Industry of Zaragoza (CCIZ).

CCIZ has listed Vietnam as a dynamic economy expected to grow 6.3 percent this year. In addition, the Southeast Asian nation has great demand for importing garments, footwear, industrial products, food, wine, olive oil, materials, and construction machines from Spain.

Meanwhile, the Chamber of Commerce and Industry of Tarragona (COCINT), under Spain’s Catalonia region, has arranged a fact-finding trip for its businesses to Indonesia, Vietnam and Thailand from March 20-30.

The Madrid Chamber of Commerce plans to send a delegation to attend the Vietnam-Spain Business Forum, which is scheduled from April 16-17 in HCM City.

Vietnam-Spain trade turnover hit a record high last year, according to Spain’s preliminary statistics. Between January and November 2011, two-way trade exchange reached EUR1.5 billion, much higher than 2010 figure of EUR1.23 billon.

Da Nang City to speed up projects behind schedule

People’s Committee of Da Nang City has announced that it intends to implement measures to speed up projects that are running far behind schedule, so as to reduce the numbers of such projects, that are seriously affecting the investment environment and socio-economic development plans of the region.

Accordingly, city leaders will meet investors whose projects are behind schedule, and projects that fall behind schedule without legitimate reasons will have their licence revoked.

According to the Da Nang Management Board for Industrial and Export Processing Zones, since 2010, a total of 17 projects have been withdrawn due to slow implementation, including eight foreign investment projects.

Currently there are six industrial and export processing zones in Da Nang, spread over a 1,106 hectare area.

The city has attracted investments for a total of 333 projects, of which 69 are foreign investment projects worth $618.5 million and 264 are domestic investment projects worth VND10,234 ($5,117 million).