Inflation threat lingers on the back of petrol price hike

Inflation threats loomed ever larger following yesterday’s petrol price hike.

By the end of yesterday, the ministries of Finance and Industry and Commerce have approved to increase the price of petrol by 10 per cent or VND2,000/litre and 15.3 per cent or VND2,800/litre to diesel oil, effective from 10.00pm on March 29.

Hiep Ngo, senior analyst from Viet Capital Securities Joint Stock Company, said that the economy would grow slower year-on-year and the month-on-month consumer price index (CPI) would cool off in April due to seasonal effects.

“However, we are still concerned about inflation as the recent hike in petrol and electricity prices will continue to have impact in the coming months. In addition, the adjustment of minimum wage and the lift in price control could put more pressure on the country’s escalating inflation,” said Ngo.

This surprise hike came after 18-24 per cent fuel price hike in late February and 15.3 per cent hike in power price effective from March 1.

Prakriti Sofat, a Barclays Capital economist, estimated that fuel price hike in February alone may add 1.5 per cent to inflation, while 15.3 per cent hike in power prices may add 0.4-0.5 per cent to inflation.

Headline CPI growth accelerated to 13.9 per cent year-on-year in March from 12.3 per cent in the previous month. Seasonally adjusted data show a 2 per cent month-on-month increase in March, faster than the 1 per cent rise in February.

HSBC economist Sherman Chan said that the notable acceleration in inflation for March was hardly a surprise, given the double-digit increases in electricity and fuel prices imposed by the authorities.

“The monetary tightening measures have gained traction surprisingly quickly, but we expect activity to start accelerating again into the second quarter. In recent years, economic activity tended to dip in the first quarter, only to accelerate thereafter. That said, more needs to be done to address rising inflation pressures and rapid credit growth,” said Chan.

Chan added that the government may announce a few more tightening moves in the coming months, including a couple of interest rate hikes and other administrative measures, possibly with regards to bank lending which should help to provide a further dampening impact and bring the inflation reading down towards single digits in the fourth quarter.

“Despite this, we remain confident in our full-year growth forecast of 6.8 per cent, the same pace of expansion as in 2010,” said Chan.

VN offers investment opportunities to Bulgaria

The Vietnamese Embassy in Bulgaria recently held an annual meeting with Bulgarian businesses to promote investment opportunities in Vietnam.

The meeting attracted the attention of almost 140 Bulgarian businesses interested or intending to conduct investment and business in Vietnam .

Speaking at the meeting, Ambassador Tran Van Thinh reported to the delegates on Vietnam ’s social and economic situation, and talked about the country’s socioeconomic development strategies in the period of 2011-2020 as well as cooperative investment results between Vietnam and Bulgaria .

He affirmed the important role of businesses in strengthening bilateral relations between the two nations in the context of the economies gradually recovering from the global financial crisis.

The embassy’s officials introduced the businesses to foreign direct investment (FDI) in Vietnam , the country’s investment laws and incentives for foreign partners, as well as tourism potential and opportunities for cooperation in the sector between Vietnam and Bulgaria in the future.

Representatives from Bulgarian enterprises praised the achievements of Vietnam , saying that this was the time to promote traditional friendship relations by cooperating in trade, education and commerce.

The participants appreciated the purpose and meaning of the meeting and vowed to work closely with the Embassy to maintain and further enhance economic cooperation between the two countries.

Retail sales see slower growth in first quarter

Retail sales value of goods and services was estimated at VND451.8 trillion ($21.5 billion) in the first quarter of the year, an increase of 22.6 per cent in comparison with the same period last year, the General Statistics Office has announced.

Adjusted for inflation, the value rose by 8.7 per cent.

The figures were lower than those of the same period in the previous year which were 24.1 per cent and 14.4 per cent, respectively.

Vu Manh Ha, senior expert of the Trade Department under the GSO said that the slower pace of retail sales in the first quarter of the year was caused by higher inflation of more than 6 per cent, compared with 4 per cent in the first quarter of 2010.

Due to a higher consumer price index, consumer spending had declined. With higher prices for the same commodities, sales volume had also fallen.

According to the GSO, commercial sector revenue, which accounted for nearly 80 per cent of the nation's total consumption revenue, rose by 22.6 per cent the first quarter in comparison with the same period of 2010.

The tourism sector saw an increase of 23.2 per cent.

The service sector accounting for nearly 10 per cent of the total revenues experienced a modest rise of 19.5 per cent.

Securities firms to tighten risk controls

A circular on financial safety standards came into effect yesterday, aiming to force securities trading institutions to apply prudent measures to control risks.

The Finance Ministry's Circular No 266 regulates that securities companies and investment funds must submit a monthly report on the adequacy ratio over disposable capital to the State Securities Commission.

The ratio, calculated on disposable capital over total risk cost, is set at 180 per cent as the adequacy for a securities company or a fund management to operate. If the ratio falls under 180 per cent, the institutions must report to the commission twice a month. If it falls to 150 per cent, the report would be made weekly.

An institution with adequacy ratio of disposable capital at 120 to 150 per cent for three consecutive months will be put under control until the ratio recovers and exceeds 150 per cent for three consecutive months.

Special measures would be applied to those having adequacy ratio below 120 per cent, said Nguyen Doan Hung, vice chairman of the State Securities Commission, adding that the control would last for six months and they would have to report daily.

In case of no improvement, along with total losses accounting for half of their charter capital, brokerages must suspend their business, Hung said, adding the commission would strictly supervise the circular and ask for reference checks from different sources.

Nguyen Thanh Hai, director of a Ha Noi-based securities firm, said that strict compliance with the circular would help sustain capital flows into securities market.

Firms urged to exploit e-commerce

Vietnamese enterprises should foster application of e-commerce to exploit new business opportunities, especially in the US market, the Viet Nam Chamber of Commerce and Industry vice chairman Hoang Van Dung told a conference on Wednesday.

Expanding use of e-commerce would help overcome the geographical distance between the two countries and reduce the cost of direct transactions, Dung said.

However, many Vietnamese firms failed to use e-commerce to effectively penetrate into the US market, which is regarded as the world's largest e-commerce market, he noted.

E-commerce was an effective channel for importers and exporters to penetrate a large playing field that enabled millions of consumers to buy products every day, said Allan Yau from Alibaba.com Group.

About 160,000 Vietnamese businesses were marketing their products on Alibaba.com, he said.

The US had been one of the leading importers of Vietnamese goods in recent years, said head of the Ministry of Industry and Trade's American Market Department Nguyen Duy Khien.

Vietnamese exports to US last year, which totalled at US$14 billion, made up 24 per cent of the country's total export value.

But this accounted for only 0.4 per cent of the total US import turnover, said Khien, adding that export potentials remained untapped.

However, Khien warned that local businesses would face stricter trade barriers this year in exporting products to the US market.

In addition to joining e-commerce trading floors to sharpen their competition and seek trade partners for themselves, he suggested domestic firms pay more attention to market segments, as well as suitable products to meet major consumption demands.

Attendants at the event also shared experiences in using e-commerce for import-export activities to the US market and challenges they had to face in shipping goods to the strict but promising market.

The US Department of Commerce's latest statistics revealed that Viet Nam's exports to the US were worth $1.38 billion in January, up 19.53 per cent year-on-year.

Among the items to record a high export turnover were apparels, footwear, wooden goods, electrical machinery and equipment as well as seafood.

Sacombank secures global credit facility

A consortium of international financial institutions led by the Netherlands Development Finance Co (FMO) has agreed to provide a credit line of US$150 million to HCM City-headquartered Sacombank.

The bank signed on Wednesday a memorandum of understanding for the financial assistance with FMO and other lending institutions from Norway, France, Belgium and Germany.

The institutions are: Norfund (Norwegian Investment Fund for Developing Countries); Proparco (Promotion and Participation for Economic Cooperation under the French Development Agency – AFD); BIO (Belgian Development Finance Institution); and DEG, which specialises in financing investments of private companies in developing and transition countries, and is a member of the German government-owned KfW Group.

Disbursement of the credit facility, which has a term of 10 years, will be made in two tranches. The first tranche of US$95 million will be disbursed in the second quarter of this year and the second one of $55 million at the year-end, said FMO senior investment director Jurgen Rigterink.

Sacombank was chosen to receive the credit facility because of its leading position in Viet Nam's banking sector, having a charter capital of more than VND9 trillion ($450 million) and a network of 370 branches and transaction offices.

Sacombank has so far received similar support of around US$300 million from FMO, Proparco, IFC, ADB and other international institutions

Agricultural imports still too high

An estimated US$3.3 billion was spent on imports for the agricultural and forestry industry in the first quarter of this year, a year-on-year decrease of 5.9 per cent, said the Ministry of Agriculture and Rural Development.

Although value had dropped, it was still too high if you took into account the fact that Viet Nam was an agricultural country, the ministry said.

Fertiliser imports accounted for $122 million of that figure and pesticides made up a further $131 million.

Nearly $210 million was spent on wood and wood-based products. Rubber imports were estimated at $193 million, up by 36 per cent over the same quarter last year.

"Recently, we have imported a large volume of fruit from mainland China. Measures need to be taken to limit this," said Pham Tat Thang from the Trade Research Institute.

Explaining why Viet Nam had imported fruit from China, secretary of the Viet Nam Fruit and Vegetable Association Nguyen Van Ky said that northern provinces often imported from China to cut transportation costs.

It was cheaper to import fruit from China than to transport from southern provinces, he said.

Ky, however, agreed that the country should not import fruit that could be grown in Viet Nam, such as oranges, mangoes and grapes.

"Every nation has a demand for imports and exports. When living standards are high, people like to splash out on exotic fruit. However, we produce a lot of cheap, high quality fruit in Viet Nam, so we should not have to import a high volume," he added.

Deal to hike transmission efficiency signed

GE Energy Services has signed an agreement with National Power Transmission Corporation (NPT) under which the two companies will work together to increase Viet Nam's power transmission efficiency and expertise and reduce the risk of power shortages.

Viet Nam experienced a shortfall of energy last year, and the government expects that demand for power would increase by at least 16 per cent in 2011. The NPT is investing up to US$5 billion until 2015 to expand and improve its power transmission capabilities to help the country meet the electricity needs of its rapidly growing economy.

Under the agreement, GE will be certified as an approved supplier of equipment to the NPT, beginning with GE's Multilin protection relays. GE will also establish training workshops to share its global experiences and expertise in the repair and selection of equipment for NPT's transmission activities.

To meet the rising power consumption needs across the industrial sector and the public domain, the government was looking not only at increasing its power generation supplies, but at increasing supply efficiency by upgrading its transmission systems, said Nguyen Manh Hung, President of the NPT.

GE had provided some equipment to the NPT previously, such as 500 kV capacitors and relays, but this is the first direct collaboration agreement between the two companies that would help Viet Nam increase its competency and capability in power transmission and infrastructure, said Ramesh Singaram, Regional General Manager of GE Energy Services Asia Pacific.

Established in July 2008 as part of Viet Nam's energy market reform strategy, the NPT was created to manage investment, construction, operation and maintenance of the country's transmission network, which includes 220 kV and 500 kV lines and associated substations.

The Asian Development Bank showed that NPT needed to invest approximately $750 million annually in new transmission assets from 2011 to 2016 to meet the energy demand, which is estimated to grow at 15 per cent per year.

Giant insurer plans 15% growth

HCM City-listed insurer Bao Viet Holdings (BVH) plans to earn a turnover of VND14.8 trillion (US$704.8 million) this year, a year-on-year increase of 15 per cent. The holding company is targeting a pre-tax profit of VND1.4 trillion ($66.7 million) and an expected dividend payment of 12 per cent.

The company's general director Nguyen Thi Phuc Lam said that the company would try hard to retain the leading position in insurance provision, while also targeting banking and investment.

Bao Viet scheduled a growth of 9 per cent in charter capital to VND6.8 trillion ($323.8 million) and 27 per cent in total assets to VND57 trillion ($2.7 million) in 2011. The company also announced their 2010 audited earnings, including a turnover of VND12.9 trillion ($604.8 million) and a pre-tax profit of VND1.3 trillion.

Securities firm to invest in fund management

Hoa Binh Securities will buy a 51 per cent stake in An Phu Fund Management, following the management board's vote ealier this week.

The company's management board will finalise the buying price which could be set lower than VND15,000 a piece, in order to ensure total payment of no more than 20 per cent of the brokerage's total assets. After the acquisition, the company's chairwoman Nguyen Thi Loan will act as their representative on the An Phu Fund Management.

Hoa Binh Securities set a revenue of VND120 billion (US$5.7 million) and a post-tax profit of VND30 billion ($1.4 million) this year. The company targeted turnover from brokerage services at VND75 billion ($3.6 million), up 42.3 per cent over 2010.

City to reward power savers

Households that cut their power consumption by 10 per cent or more will be rewarded under a campaign launched to partially offset power outages facing the city.

Enterprises and residents will experience regular power cuts because of a supply shortage and reduced household consumption can mitigate the situation significantly, officials said.

According to the HCM City branch of Electricity of Viet Nam (EVN), the national power utility, households consume up to 40 per cent of the city's power use.

EVN and the HCM City Energy Conservation Centre have launched a campaign calling on city residents to commit to saving electricity. They have promised to reward households that were able to reduce their power consumption.

Households that can reduce at least 10 per cent of their daily electricity consumption over the next three months compared with the same time last year will be given rewards of VND200,000 to 500,000 (US$10 – 24).

The campaign promises 10,000 such awards for households found practising power saving methods at the district level and 240 city level awards.

The municipal administration estimates a shortfall of 1.5-2 million kWh each day at present, and this is expected to increase to 2 million kWh per day in April, with the onset of the dry season.

Huynh Kim Tuoc, director of the HCM City Electricity Energy Conservation Centre, said households in the city have to pay VND5.2 trillion (US$248 million) for their electricity bills each year. If each family can save 10 per cent of their consumed power, accounting for 2 million kWh power a day, the city would save a huge amount of money, he said.

"87,000 households in the city committed to save 9 per cent of their power consumption last year. This year's campaign targets women because they are responsible for managing household finances and regularly use electronic household appliances," Tuoc said.

If 1.8 million households did not use air conditioners for just 30 minutes a day, they would save 0.9 million kWh, he said. Last year, a campaign calling on households in the city to save electricity effected savings estimated at 31 million kWh.

Deputy Chairman of the city People's Committee Nguyen Trung Tin has asked EVN to take measures to improve power supply during the dry season and enterprises to adopt power saving practices.

He suggested that enterprises equip themselves with standby electricity generators in case of power cuts. Production enterprises should rotate their schedule and work on Saturdays and Sundays to avoid power consumption during peak hours.

Some 553 enterprises in Thu Duc, Binh Chanh, Binh Tan Districts have committed to rotate their production schedule to help avoid power shortages during peak hours.

Along with HCM City, many other cities and provinces like Dong Nai, Kien Giang, Can Tho, An Giang, Binh Phuoc and Ha Noi have also adopted plans to improve energy efficiency and save power.

VN, Holland to co-operate on husbandry

The significant potential for bilateral co-operation in the livestock breeding sector between Viet Nam and the Netherlands, especially rearing pigs, was highlighted at a conference held in HCM City on Thursday.

Despite difficulties caused by economic crises and climate change impacts, Viet Nam's agricultural sector has maintained an average growth rate of 4.7 per cent, ensuring local food security and increasing exports, said Diep Kinh Tan, Deputy Minister of Agriculture and Rural Development.

The livestock sector accounts for 27-28 per cent of total agricultural production, Tan said, adding 70 per cent of this was made up by pig farming.

Animal husbandry in Viet Nam was characterised by small-scale, scattered farms, haphazard slaughtering and weak hygiene and safety controls, he told the conference that focused on livestock value chain and food safety.

The small scale operations and outdated production techniques led to high production costs, and Viet Nam's livestock products were less competitive compared to other countries, said Hoang Kim Giao, director of the Livestock Production Department under the Ministry of Agriculture and Rural Development.

A poor veterinary system and shortage of technical equipment for preventing and controlling diseases had made livestock production an unstable vocation for many farmers, he said.

In response to this situation, the Government has formulated a Livestock Production Development Strategy until 2020 that created a legal framework for comprehensive livestock development, adopts a value-based farm to table approach that integrated food safety and environmental protection, he said.

Do Kim Tuyen of the Livestock Production Department said that under the plan, the country aimed to increase its pig population from 27.37 million in 2010 to 34.5 million by 2020.

The general objective was to modernise pig production methods, shifting from household-based breeding to industrial farms, Tuyen said.

It also targeted re-arranging pig farming to ensure safety and hygiene in breeding as well as preventing diseases to improve productivity and quality, and protect the environment, he said.

The ministry had designed many projects calling for investment in a value chain that linked farms to tables, and these had been supported by many countries including the Netherlands, Tan said.

Dutch expertise

Speaking at the conference, Minister for Agriculture and Foreign Trade of the Netherlands, Henk Bleker, expressed optimism about boosting bilateral co-operation in the livestock sector.

Just as in Viet Nam, the agricultural and food sectors formed a strong pillar of the economy in the Netherlands, he said.

Dutch companies could offer their know-how and experience and were willing to establish long-term co-operation with Vietnamese partners to help develop the livestock sector in Viet Nam, he said.

During the conference that was attended by Princess Maxima of the Netherlands, the two sides signed a Letter of Intent for G2G proposals under which the Dutch government would support Viet Nam in dairy cow breeder management, slaughtering and processing as well as hygiene and food safety management.